iPod disabled, won't factory reset.

My friend gave me an iPod touch that he disabled somehow to fix. On the home screen of the iPod, it says "iPod is disabled, connect to iTunes". When I try connecting it to iTunes, iTunes pops up a message that says "iTunes could not connect to the iPod "iPod touch" because it is locked with a passcode. You must enter a passcode on the iPod before it can be used with iTunes." I've tried powering it off, holding the home button, and plugging it in to put it in recovery mode and do a factory reset, but that doesn't work either. Any suggestions on how to reset this thing?