As Jessen is saying i aluding too, I think you really have a 2G iPod since those can only go to iOS 4.2.1. If yours is an 8 or 16 GB one without a camera it isa 2G, Apple only made 32 and 64 GB 3G iPods. A 32 GBcan be either. To identify yours:
Regarding your problem, I would try the standard fixes:
- Reset, nothing will be lost.
- Restore from backup
'- Restore to factory defaults/new iPod.
If still a problem then you likey have a hardwarware problem and an appointment at the Genius Bar of an Apple store is in order. It is free.