Transfer iTunes purchases to the computer by:
In iTunes 11 use Control+B to show the Menu bar then go to iTunes>File>Devices>Transfer Purchases
You can also try update directly on the iPod again. I got the same error message a few times with the last update. I just tried again and it went through either the next time or on the the third attempt. It appears that the Apple servers are just busy since after the update file is downloaded, the iPod has to again contact the Apple servers to verify the download and that second connection was not made.