Q: How do I unlock my ipod

That's an iPod nano, correct?  This document

http://support.apple.com/kb/HT1350

says that if you connect it to the computer that it normally syncs with (and run iTunes), it will be unlocked.

Also, doing a Restore (using iTunes) will unlock it.  It will also erase the iPod, re-install its software, and set it to default settings.