Ok so everyone trying to do the jailbreak on an itunes 7.6 is going to have every kind of trouble trying to jailbreak!
you need to have itunes that is lower than 7.6!
http://theidoblahblahblahblahes.html
you can get the files above to jailbreak as well as older itunes!
the reason that you cant use 7.6 is because it blocks the oktoprep hack from working when you update it!
so in short here is the process... you get ipod, downgrade to 1.1.1, jailbreak it from jailbreakme.com, install oktoprep, and update to 1.1.2.
if you update it with 7.6 you will have to start over... if you update it with something lower... your safe and can move to the 1.1.2 jailbreak!
i have seen a lot of questions and problems with jailbreaking at that stage and this will help solve a lot of problems and questions as to why!
ALSO... IF YOU ARE A WINDOWS USER... USE WINDOWS.BAT FOR JAILBREAK NOT THE JAR FILE.... I MADE THAT MISTAKE ABOUT 50 TIMES BEFORE I FIGURED IT OUT... THAT WAS MY DUMB MOMENT OF JAILBREAKING!
i hope this helps a little! i will try to post some other helpful stuff