After restoring factory settings to my 3rd generation iPod touch, the wi-fi was grayed out along with iCloud, email, twitter, navigation, etc. I'm in the process of restoring it again and hopefully the newest update of 5.1.1 will fix the problem.
iOS: Wi-Fi or Bluetooth settings grayed out or dim
It is frequently a hardware problem and an appointment at the Genius Bar of an Apple store is in order.
Retrieving data ...