Hii
Please have a try on these steps..
1. Reset the IPod thrice and then connect it to the computer/Laptop.
2. Then Format the Removable drive in "My computer" to FAT 32 type.
3. Then try restoring the IPod Using IPod Updater.
4. Try the same steps in all the USB ports if it fails and then try in a different computer..
5. If possible use another shuffle and try the sane steps..
6. If another shuffle works fine, then send this iPod (with error) for service..
For sending it to service please visit the link "depot.info.apple.com/"
Also Refer the link "http://docs.info.apple.com/article.html?artnum=302204"
Please revert back on clarifications...
Good luck.
Bye