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what generation iPod are you using? for a 3G iPod, you reset the ipod by holding the Menu and Pause/Play buttons. then when the apple logo comes up, you press the "Previous, Next, and Select" buttons together, you should hear a weird squack come from the 'pod, then you will see a weird list of items, and the scroll wheel doenst work.

the option that scans the HDD for errors is the "O . HDD SCAN" option. cant say what the other ones are for, I probably wouldnt go messing around too deeply in those settings.
 
Wow.. that was a weird squack. With the Apple logo reversed too. I'm running the hdd scan seeing if it picks anything up. I'd be interested in knowing what all those other options do. Thanks for the tip. Maybe this will pick up something.

You're able to use Disk Utility and format it as HFS (Journaled) then restore with the iPod Updater correct?
 
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