First read this:
http://docs.info.apple.com/article.html?artnum=305136 Even if there are no new drivers available for your computer, reload the USB driver.
Next, connect your Nano to your computer using a rear USB port on your computer and disconnecting all other USB devices except for your keyboard and mouse. If you have your Nano in disk mode and it shows up in My Computer, right click on it and then format it (FAT32, don't use quick format). After this, Restore it in iTunes.