[HOW TO] - Force iPod into restore mode.

Taken from --> HERE

There are a lot of posts with people asking how to do this so I thought I would post this thread to limit the questions.

Warning: This should be used as a last resort, restoring will erase all of your data

*Must have iPod plugged into computer while doing this*

Be patient, the force restore part may take up to 20 seconds.

1. Press and hold the home button and the sleep/wake button. (the power off option will appear, ignore it)
2. When the apple logo appears let go of the sleep/wake button (keep holding the home button.)
3. After a few seconds you should see the connect to iTunes image (you can now let go of the home button.)
4. Open iTunes .
5. iTunes should automatically recognize your iPod once the image comes up, if not unplug your iPod and plug it back in.
6. Restore your iPod by clicking the "Restore" button.

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If iTunes comes up with an error you may want to try

a. Uninstalling and reinstalling iTunes or
b. restoring on a different computer.

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Other resources:-

Frozen iPod touch and common issues
iPod touch: Basic Troubleshooting
Updating and restoring iPhone and iPod touch software