Honestly I had that same problem for about ages. But I was able to downgrade and jailbreak my iPod 2g. What you is back up your iPod with tiny umbrella and then download the 4.0 firmware from sites such as RedMondpie and (u might not have to put your iPod in DFU mode) and try and restore. If it doesn't work on that computer Try another computer and perhaps that will work. Just try different firmwares and different computers and try and try. People said it was impossible but I did it some perhaps u can