Gapless playback doesn't work on my ipod

When i updated itunes to itunes 7 it automatically started to convert my songs so that they would play gaplessly. my ipod was connected at the time and it lookd as if the songs on my ipod were being converted as well because i saw the name of my ipod in the itunes window.

when i play my songs in itunes before one song is over it fades to the other. when i play a song on my ipod seconds go by before the other song begins.

how do i use the gapless playback feature?

Dell Windows XP 5th Generation 30gb ipod (Black)