I think you are on the right track with wanting to do the restore. It also sounds like the iPod seems 'different' to the computer and that is why it is asking to transfer the purchases. Here is some more information about the transfer purchases function.
iTunes Store: Transferring purchases from your iOS device or iPod to a computer
I would recommend right clicking the iPod in iTunes and choosing backup, if you can, then transferring the purchases. You may have to setup what items sync to the iPod again.