Smart Playlist's "Live Update" Function Doesn't Work on my iPod Nano 5th G.

I have some simple "live update" smart playlists in my iTunes v 10. Whenever an item is modified (i.e. adding a rating), it "live updates" accordingly.

However, "live update" doesn't work on my iPod Nano 5th gen. The smart playlists on my iPod only update the next time I sync it with iTunes, instead of updating live on the iPod. Is this normal and how do I fix it?

Technical Details:
- iTunes PC: version 10
- iPod Nano 5th Gen.: FW 1.0.2PC, 16GB, Model A1320

Example of a smart playlist that doesn't live update on the iPod:
- Select all songs that has at least a rating of 1 star,
- Live Update checkbox is checked.

Steps to Reproduce:
- Create the smart playlist above in iTunes,
- Connect the iPod, and sync the smart playlist along with some music,
- Play a song on the iPod and give it a rating of 1 star,
- Let the song play until the end,
- Reach the Playlist menu on the iPod and select the smart playlist,
- Notice that the song that has just been rated doesn't appear in the "live update" smart playlist on the iPod.

Any help would be appreciated.

Thanks