It says audio 6.31 gb other 188.5 mb
So while you may have converted your songs to a lower bit-rate, it sounds like the higher-bit-rate ones are still what is being synced to the iPod.
If you are trying to put as many songs as possible on there, and have more than the claimed max 1700, then you need to convert your songs to lower bit-rate first (sounds like you already have,) then tell the iPod not to sync higher-bit-rate songs.
In iTunes, create a new "Smart Playlist". (File -> "New Smart Playlist")
Change the boxes to be "Bit Rate" "is less than" and type in a number slightly higher than the bit-rate you manually created. (so if you created 128 kbps, type in '130'.)
Click "OK" to close the dialog box, then find the newly created "untitled playlist" in your source list, and give it a more descriptive name, like "Low Bit-rate".
Now click on your iPod touch in the source list, go to the "Muisc" tab, choose "Selected playlists, artists, and genres", and make sure the
only thing
with a check is the "Low Bit-rate" playlist. Every other playlist, artist, and genre should
not be checked.
Click "Sync".
Of course, you really have to ask yourself, will you ever go long enough between syncs that you will listen to all 819 songs you have now? If your entire library doesn't fit on the iPod, even at lower bit-rates, then you'll have some sub-set anyway. You might as well not go through tons of effort to cram more on if it won't get 100% of your music on. Just sync more often. (I know I never listen to every song on my iPhone between syncs, I just have a select few playlists of "always on the iPhone" songs, and have the "Automatically fill free space with songs" checked, which means every time I hit Sync, it picks new stuff to swap in.