iTunes won't synch 80 songs at 128 kbps despite having 5.5 GB of space on iPod. iTunes or iPod error?

My 4th gen 30 GB iPod has 5.5 GB of space on it (this is what iTunes says before I hit sync). I want to add about 80 songs to be automatically downconverted to 128 kbps. When I try to update iPod, iTunes indicates iPod is overcapacity by over 19 GB and won't add new songs. Something is not right with either iTunes or iPod. Is anyone else having the same problem?

All I have is music on the iPod. No apps, no games, no movies, just music.

I just subscribed to iTunes Match. Could this be the reason why this is happening? Is anyone else having the same problem?