I've got iTunes 7 and just bought an iPod nano 2gb. The iPod's firmware was updated the first time I plugged it in.
Upon syncing it up, the iPod would play aiff files but not mp3s. I tried encoding the same album in different configuations (eg as aiff, mp3 in different resolutions) but when brought over to the iPod, again, with mp3's I would get the album art and track title, but the iPod won't start to play the song. It just stays stuck on 0:00 even though the "play" icon is there.