I have an iPod Touch here, second possibly third generation which is not syncing video.
I've converted this video to general .Mp4... and H.256 and confirmed that these videos will sync to my iPhone 4, 4.2.1 OS without an issue.. but will not sync to iPod Touch. Message in iTunes comes up as unsupported format.
The iPod Touch was updated from 4.1 to 4.2.1 recently. This did not correct the problem. Model number is MC086C which depicts third generation... but the Apple Serial Number says the Touch is a second generation.
I have sorted out the video issue. Turns out the video was not 480x320 exactly so it would not sync over. Odd, never gave that aspect much thought.
As for the model itself, the jury is still out. The model number from the firmware and the number printed on the backplate indicate third generation iPod Touch however third generation models did not come in eight gigabyte sizes. It is very odd, and it was legitimately purchased from a retailer.