I suddenly have this exact same problem. I have a 160gb Classic. I noticed yesterday that I was almost out of battery power so I hooked it up to my work Mac. It charged all day and then when I went to listen to music--everything had been wiped off! So when I got home I hooked it up to my own MacBook Pro and it won't sync. It won't restore. It just says there's a problem with the iPod. Really? It's been working great for 3 years.
Which version of iTunes are you using? (most probably the latest, a lot of this hung iTunes coming in)
Which iPod software is shown on the iTunes summary screen?
My suggestion go on Diskmode.
Connect it to iTunes via a USB2.0 port (For Mac please dont use the Keyboard USB port and for MB, only one USB port is for iPod, the other will freeze your iTunes as the resource bus is shared with other devices )
Then update the iPod software or Restore the iPod.
Try to disconnect your iPod from the PC, if you are not charging or Syncing the iPod, or else, some Apps will just trigger a Restore and delete you iPod.
For Mac users, who has a FAT32 iPod, you may find iTunes Restoring it to HPS+ if you leave it connected overnight.
For Windows users, some Winsock layer conflict with iTunes will trigger the Restore.