Have you updated iTunes? needs to be 4.7.1. I forgot to update iTunes when I got my shuffle and was cursing it for 10 minutes until I realised what I'd done. Run the cd that came with the shuffle and install iTunes and the iPod updater (22/01/05?) and then it should work. Hope it works
Thanks Blue Velvet, a USB extension cable did the trick. It seemed like the iPod fit right into the socket of the iMac, but apparently it did not connect properly. The USB plug of the iPod is indeed about a millimeter shorter than others. Thanks again for the idea!