Having returned my 5.5G 80G Pod and receiving a unit that had the same problem (relating to not seeing the OK to Disconnect message) I figured it was a bug. So yesterday I see iTunes telling me there's a 1.2.1 update, so I download it and install it. Unfortunately, it looks like that bug was not addressed as the behavior remains the same.
HOWEVER, it has seemingly added a very major bug, one that invalidates a ton or work I've done to set the device up. My usage is heavily dependant on smart playlists. Has been since 2nd gen. I have a gazillion smart playlists by artist that only show unplayed songs. When I have listened to all th songs, the playlist, being completely empty, isn't shown. To bring that specific playlist back to life, I simply change the playcount (they are all based on playcount).
Whoa, now every single playlist I have is being shown! Most all of them with zero entries. It might take me who knows how much time to keep hitting the next one to see if there's any content... this is way bad.
So, exactly HOW can I get the device back to the 1.2 release?