i forgot my password and itunes won't let me reset my ipod touch

Did you try connecting in recovery mode: start iTunes, attach the USB end of the cable, while holding the home button connect the 30-pin connector to the iPod, then when iTunes recognzes it, select from the devices and in the Summary page select Restore.

The restore button is on the Summary pane for the iPod in iTunes. You may have to place the iPod in Recovery mode for the iPod to appear in iTunes.