I have recently learned that the continuous repeat symbol has 3 states: 1. no repeat, 2. repeat album (shown above), and 3. repeat song (tap the repeat album icon again to get it). (Tap once more to get back to no repeat)
+1
I got my 32GB 3G iPod Touch on Tuesday and everything worked great except for the music playback, which seemed to be behaving randomly. I pulled up the repeat options as you show and I found both of these options were turned on. So, I turned them off and everything's fine now.