I had thought, from your subject title, that you were going to ask how to turn off repeat, but it appears that you are offering a solution.
To be clear on how this works, selecting Shuffle does not turn off the Repeat function. If you simply turn on Shuffle, it will make no difference if the Repeat 1 function is on. Repeat 1 plays the same song over and over, until you stop the player or manually select a different song.
To turn off the Repeat function, tap the Repeat button twice (or, in America, two times). First tap turns on Repeat 1, second tap turns Repeat off. A further tap will turn on Repeat (All).
Oh, and by the way, the subject has come up recently - and been answered (complete with screenshots):
how to stop song repeating on i pod playlist - in the iPod Touch forum (that's this one) asked 3rd March and answered on 4th March. Marked as solved
Ipod Touch won't advance to next song - also in the iPod Touch forum, asked 6th March and answered on 8th March. The original poster's response suggests that this solved his/her issue