I kinda had a similiar problem not sure if this will work for you but it did work for me.... My mom just got the newest iphone and gave me her old itouch (3rd Gen). And i didnt want all her old crap so the same as you I restored it to its original factory settings then loaded all my music and videos on it BUT then when I went to start downloading apps it wouldnt let me download anything! always said some error. After calling apple what I found out was that even if you never plan on buying a single thing whether it be an app, song, podcast,movie etc you must completely register an itunes accout or re activate an existing "with an valid credit card" on the account even if you never buy anything. Also make sure when logging into your itunes account from your device for the first time you accept the terms of service agreement, if not prompted sign out and try again. Or go to view apple ID in the settings of your device. Hope this help is not too late.
