I have an ancient (in "i" terms) iTouch 1G. Yup... 1G. I jailbroke it a long time ago. Don't even know what the firmware was last time but I think 3.1.something...
Anyhow, I got iPhone 3Gs and decided to give my old iTouch to my wife. I did a reset on it to erase everything, she's not interested having it jailbroken.
So... it says it takes about an hour to erase and reset and there's little bar to show progress, it finishes and reboots. The apple logo comes up with the little processing circle... and stays there...
Check out this thread, especially post #3 and post #29:
[ame=http://forums.macrumors.com/showthread.php?t=367174]iPod Touch is stuck on the Apple logo - MacRumors Forums[/ame]