I'm having the same problem with the Phillips Fedelio DS7550 portable speaker dock but my iPod Touch is a 4th generation though, and my iPod Touch keeps telling me that it isn't supported!
I am having the same exact problem with my iPod and Dream Machine. Your daughter wasn't mistaken, as I have had my dock for almost a year now, I was very disappointed when I just stopped playing music from my iPod. I am curious, how did you reset the iPod? Restore through iTunes or hard reset with the iPod only? It stopped playing through the dock just after I downloaded the 4.3.3 software version.
Ok, so I have IOS 4.3.5 and my ipod was working fine, like all the others it seems, until an x amount of time after initiating use with my dream machine. I have done everything you mentioned, and still the ipod does not play on my dock. Any other suggestions?
WHat did you have to do to reset your iPod touch? We have the very same problem with the dream machine. My iPhone works in it and a iPod 3G works in it fine. The 4g has the iOS 5.01 update as does the iPhone..
Ipod touch not playing music in docking station