Hello Wayne,
Thank you for the details of the issue you are experiencing when trying to sync your movies purchased through the iTunes Store to your iPod touch. I found an article with some useful information:
The iPad and iPhone 4 can play High Definition (HD) content and Standard Definition (SD) content. iPods and the original iPhone, iPhone 3G, and iPhone 3GS can play Standard Definition (SD) content. To find what video formats are supported, see the Tech Specs page, click your device's product family, and then your specific model. All HD purchases from the iTunes Store also include an iPod/iPhone-compatible Standard Definition version to accompany the HD version. When syncing an HD purchase from the iTunes Store, iTunes will automatically sync the SD video for devices that require SD content.
You can find the full article here:
iTunes: May be unable to transfer videos to iPhone, iPad, or iPod
http://support.apple.com/kb/TS1497
You can download the SD version of the movies from your list of past purchases. You can find the steps to do this in the section titled "Apps, Books, Music, Movies, or TV shows on a computer" in the following article:
Downloading past purchases from the App Store, iBookstore, and iTunes Store
http://support.apple.com/kb/HT2519
Thank you for using Apple Support Communities.
Best,
Sheila M.