Try manually connecting the device to your PC in Disk Mode and then restoring it iTunes.
Putting iPod devices with a Click Wheel into Disk Mode
- If necessary, verify that your iPod has a Click Wheel.
- Before placing the iPod into Disk Mode, verify that it is charged.
- Toggle the Hold switch on and off (set it to Hold, then turn it off again.)
- Press and hold the Menu and Select buttons for at least six seconds, until the Apple logo appears.
- When the Apple logo appears, release the Menu and Select buttons and immediately press and hold the Select and the Play/Pause buttons until the Disk Mode screen appears.
- Connect the iPod to your computer; the screen on the iPod will should say "Do not disconnect".
If you are having difficulty putting your iPod into Disk Mode, set it on a flat surface. Make sure that the finger pressing the Select button is not touching the Click Wheel. Also make sure that you are pressing the Play/Pause button toward the outside of the Click Wheel and not near the center. If you are still unable to put your iPod into Disk Mode, use one finger from one hand to press the Select button, and one finger from the other hand to press the Play/Pause button.