Without knowing what hppens wehn you try to install iTunes:
One you get the latest iTunes installed, try reimporting the music if you get the library error. For further help with iTunes port in the iTunes forum
Place the iOS device in Recovery Mode and then connect to your computer and restore via iTunes. The iPod will be erased.
If recovery mode does not work try DFU mode.
For how to restore:
To restore from backup see:
If you restore from iCloud backup the apps will be automatically downloaded. If you restore from iTunes backup the apps and music have to be in the iTunes library since synced media like apps and music are not included in the backup of the iOS device that iTunes makes.
You can redownload iTunes purchases by: