Q: How can I reset my iPod Touch back to default?

Disabled

Place the iOS device in Recovery Mode

https://support.apple.com/en-us/HT201263

and then connect to your computer and restore via iTunes. The iPod will be erased.

If you forgot the passcode for your iPhone, iPad, or iPod touch, or your device is disabled

https://support.apple.com/en-us/HT204306

If recovery mode does not work try DFU mode.

How to put iPod touch / iPhone into DFU mode « Karthik's scribblings

https://geekindisguise.wordpress.com/2009/07/16/how-to-put-ipod-touch-iphone-int o-dfu-mode/

For how to restore:

Use iTunes to restore your iPhone, iPad, or iPod to factory settings

https://support.apple.com/en-us/HT201252

To restore from backup see:

Restore your device from an iCloud or iTunes backup - Apple Support

https://support.apple.com/en-us/HT204184

If you restore from iCloud backup the apps will be automatically downloaded. If you restore from iTunes backup the apps and music have to be in the iTunes library since synced media like apps and music are not included in the backup of the iOS device that iTunes makes.

You can redownload most iTunes purchases by:

Downloading past purchases from the App Store, iBookstore, and iTunes Store        

https://support.apple.com/en-us/HT201272

If problem what happens or does not happen and when in the instructions? When you successfully get the iPod in recovery mode and connect to computer iTunes should say it found an iPod in recovery mode.

Did you place it in recovery mode?

1. Connect your device to your computer and open iTunes. If you don't have a computer, borrow one from a friend or go to an Apple Retail Store or Apple Authorized Service Provider for help.
2. While your device is connected, force restart it: Press and hold both the Sleep/Wake and Home button for at least 10 seconds, and don't release when you see the Apple logo. Keep holding until you see the recovery mode screen.

If you can't update or restore your iPhone, iPad, or iPod touch - Apple Support