I am kinda with iGary but have some input none the less.
1. Toothpaste does work (it even works on minor scratches on cars). I am an automotive detailer for show cars, and have used toothpaste on minor scratches caused by coats or otherwise rubbing on paint.
2. A MUCH better solution would be a silver polish, or a lightly abrasive automotive polish like a cleaner wax, or light rubbing compound. If you have access to 3M products their "Finesse it" has worked quite well for my ipods.
3. ANY polishing done on an iPod is said to not void your warranty by a few people, however I am not sure of this myself.
4. Polishing on the back of your ipod will slowly remove any engraving on the back, including custom engraving done by Apple, as well as the iPod and Apple logo. Also included in this would be the Serial number on the back of your ipod.
5. If using a machine to polish your ipod, keep the buffing speeds low, as it will create heat, and you don't want to cook your internals!
HTH