I had a similar issue. I use a Mac with iTunes for my Apple devices, but neither the Mac nor iTunes would detect my 2nd generation Shuffle (I got it used). My solution was to:
- Connect the Shuffle to a PC running Windows 7 64-bit (any version of windows should be okay),
- Find the device in Windows Explorer
- Reformat it as Fat32
- Plug it into the Mac
- iTunes immediately recognizes it and walks through the setup steps
Prior to this I had spent 3+ hours searching through the web for troubleshooting / resolution steps but none of them worked. When I attempted to use the iPod Reset Utility the Reset capability was disabled, with the message of "waiting for ipod to become ready".
If it is relevant, when the Shuffle was not being detected it was flashing an orange light repeatedly when connected to the Mac. The weird thing is even though it was not being detected by Finder, iTunes, Disk Utility, or iPod Reset Utility, it was able to charge it.
Bottomline: I was afraid to reformat the Shuffle, but it worked like magic.