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I can't believe this is still not fixed. Why haven't Apple pulled this update? Beggars belief.

Like an idiot I naively thought they would have pulled their fingers out by now; perhaps the problems were related to iTunes and Quicktime and had been fixed in the latest releases; perhaps a silent fix to the updater etc.

Updated my 60GB iPod to 1.1 with a fresh download of the updater and lo! Skipping audio tracks and scratchy distortion - on newly downloaded tracks from the iTMS as well. I've not even tried any video.

Having to downgrade and upload over 50 gigs of music again. Thanks Steve, no really, it's my pleasure.
 
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