That's pretty bizarre. Minimally, you could check the 'ignore update' box to make it go away.
I'd like to add my own iPod update problem to the thread:
I updated iTunes, my iPod and Quicktime. It all (seemingly) worked well after the reboot. Then I took my iPod out and when I came back and put it back in its Dock, the Finder crashes. I was forced to reboot. I couldn't reboot with the iPod connected, the boot sequence stalled at 'Waiting for local disks...' and after disconnecting it, my machine boots fine, but my iPod won't mount anymore, even after resetting the iPod.
I've been pretty disgusted with the connectivity of the iPod on my system. It really screws up the entire firewire bus and any other device that I have on it. With every new update I hope that Apple will make it better, and every time it gets worse. This time around, I only have my iPod plugged into firewire...I shouldn't have to troubleshoot THAT!