2nd generation Ipod Shuffle problems

Hi, I've been given an 2nd generation Ipod Shuffle for Xmas and have been trying to download CD's onto it using my iMac.

My Imac runs on OS X 10.2.8 and has Itunes V3 on it, I have successfully managed to download the CD's onto itunes but itunes is not recognising my Ipod when it is plugged in, so therefore cannot load the music onto it. The Ipod is visible on the desktop as an external drive plugged into the USB port.

The Ipod is fully charged but I am unable to download the latest version (V7) of Itunes as it seems this is not compitable with current platform - any help on what I can do would be most appreciated as my shuffle is currently useless.