Did you already try to connect in recovery mode to restore? http://support.apple.com/kb/HT1808
If this does not work, try to delete the ipod software (ipsw) file located in C:\Documents and Settings[username]\Application Data\Apple Computer\iTunes\iPod Software Updates to make iTunes download a new copy when you connect in recovery mode. Maybe the file stored on your PC is damaged.
If recovery mode does not work, try DFU mode instead.
Message was edited by: Ingo2711