I dropped my iPod nano in water. Will it work again?

I'm afraid the damage may very well be permanent. Even quite small amounts of water can corrode the very fine copper strips which form the circuit board, and this can appear some time after the initial event. In any case if you are seeing water in it you definitely shouldn't charge it. You should leave it for quite some time for the water to evaporate: it's popularly believed that putting it a bag of (uncooked) rice will help as the rice will help absorb the water - in any case it can't do any harm as long as you dont let rice grains or dust get into the device.

But you should be prepared to find that eventually it stops working.