My experience with 4G 40G iPods has been similar. Reliability has been poor. (I have three 40G units of which two have failed and been replaced a number of times by Apple).
On a positive note each time one of my iPods failed it was replaced promptly with another unit by the local Apple reseller.
The pain was dropping-off and picking-up the units. (My choice after using the courier service with the attendant lead times).
In a post to this forum someone suggested the 40G 4G iPod is particularly prone to failure and this seems to be borne out by a survey done last year by
http://www.macintouch.com/reliability/ipodfailures.html
The best you can do is to follow the Apple's 5Rs, read the guidance on the Apple site and keep an eye on the date when your warranty is due to end. The extended waranty is also worth considering if you've been plaughed by unreliability.
In addition to Apple another useful resource for iPod maintance is:
http://www.methodshop.com/mp3/ipodsupport/erase/index.shtml