I have experienced this same problem. I can solved it by using latest itunes 7.1.1.5 downloaded from apple website. After installed it, connect your ipod and restore your ipod. After restoring successful, the software will ask you to input ipod name and options to download music and photos. please check all. Then you will synchronize your photos to ipod.
By the way, I use photoshop album for my photos it photos tab.