If it's just the app, try to reboot it by double clicking the home button and remove it from the open app list by holding down on it, then open it again. If it still doesn't work, try to restore the iPod to your last backup via iTunes. And if that doesn't help... I dunno.
If the suggestion above does not work, you very well might need to replace the camera module. There are quite a few third party shops who can do that repair for you at a fair price. http://www.repairzoom.com/ To name one.
