Original iPod. It has the scrollwheel that physically turns in a circle?
What you are trying to do is a Reset, which just "reboots" the iPod. The iPod is NOT erased and it is NOT set to default settings. The buttons you press and hold for a Reset are different for older models. This document has the procedure
http://support.apple.com/kb/HT1320 - See How to reset iPod, iPod (scroll wheel), iPod (touch wheel), and iPod (dock connector)
Once the iPod is running, you can reset all setting to default settings. From the Settings screen on the iPod, the last item should be the command to Reset All Settings.
If you want to erase the iPod, re-install its software, and set it to defautl settings, that is called a Restore. That procedure is done in iTunes, from the iPod's Summary screen (in iTunes).
NOTE: The original iPod only connects using FireWire, not USB.