Can I repair my Ipod?

I have an iPod classic 80gb video for a long time and it worked perfectly full of music, that is why I neglected the software updates. However , today my iTunes told me I have an error and that I should restore my Ipod.I did just that and it's still saying i have the error. Another thing I've noticed is that at the About section it tells me I have available space of 159gb , which is impossible since the back cover says clearly 80gb. My question is if I can repair this problem? Is it a software or a hardware problem? and most important , should I keep it or throw it away?