Welcome to the Apple Support Communities. If you are stuck at the iPod is disabled screen, the following article will explain what can be done.
Connecting the device may result in this error message: "iTunes could not connect to the [device] because it is locked with a passcode. You must enter your passcode on the [device] before it can be used with iTunes."
- Disconnect the USB cable from the device, but leave the other end of the cable connected to your computer's USB port.
- Turn off the device: Press and hold the Sleep/Wake button for a few seconds until the red slider appears, then slide the slider. Wait for the device to turn off.
- While pressing and holding the Home button, reconnect the USB cable to the device. The device should turn on.
- Continue holding the Home button until you see the "Connect to iTunes" screen. When this screen appears, release the Home button.
- iTunes should alert you that it has detected a device in recovery mode. Click OK, and then click Restore to restore the device.