This functionality has apparently been disabled in the latest iPod software update. Whether this was intentional or not isn't entirely clear, but other people have said the same thing. At the moment, the only thing you can do is to downgrade to the previous software (which requires erasing your iPod and copying your songs again.
By the way, your signature is much too large. They need to be around the size of the picture in my sig. The exact guidelines can be found somewhere around the forums.