Here is the Apple way http://support.apple.com/kb/HT1414
Use the following steps to restore your device:
1. Make sure you have the latest version of iTunes installed and running before attempting to update.
2. Connect your device to your computer.
3. Select your iPhone, iPad, or iPod touch when it appears in iTunes under Devices.
4. Select the Summary tab.
5. Select the Restore option.
6. When prompted to back up your settings before restoring, select the Back Up option (as seen in the image below). If you have just backed up the device, it is not necessary to create another.
7. Select the Restore option when iTunes prompts you (as long as you've backed up your device, you should not have to worry about restoring your phone).
8. Once the restore process has completed, the device restarts and displays the Apple logo while starting up
9. The final step is to restore your device from a previous backup. Once your device is restored and—in the case of the iPhone—in the process of activating, you should be able to see the following in iTunes:
iTunes window text: "Set up your iPhone... An iPhone has been previously synced with this computer."
Select the backup you want for your device and select the Continue button to complete your device's restoration.
If you do not want to restore from backup, select "Set up as new…" If you want to preserve previous backups that iTunes has made, be sure to back up the appropriate directory before choosing to set up as new.
Or you can just do it this way...of course may be different for your OS.Settings --> General --> Reset --> Erase All Content and Settings
It is quicker and erases ALL content of your iPod. The only problem with that is that it also erases EVERYTHING so after doing that, you have to connect it to iTunes, and install firmware. This could install software that does not allow you to jailbreak it. So you may have to do a shift/restore if you jailbreak and download a firmware version that enables jailbreaking. good Luck and I hope this has helped a little.
Or you could just wait for about 10yrs :-)
Good Luck to you