So the iPod appears to function as expected when connected to a PC/Mac, but does not function at all when disconnected correct?
I know you have already tried a reset, but what about a full restore in iTunes? A restore of the Shuffle will wipe all content from the device, reset all settings back to their defaults, and load a fresh copy of the iPod's software onto the device. This should help rule out the possibility of any sort of software error/glitch or corrupte data.
I am having the same problem with mine.
When connected to the PC it seems to be ok. All the light signs are working (sync, battery, etc.). I can access it by iTunes, add or delete music, etc.
But when I unplugg from the PC it will not respond to anything.
I have tried the hard reset and to restore it...no change at all.
Anyone can help!?