I downloaded iTunes 10 but now it won’t update the iPod Touch software

If you have the 4.0 beta, you are able to download the 4.1 GM from developer.apple.com and use Xcode's Organizer or iTunes (by holding the option key when clicking restore) to choose the correct version of iOS (which is on the disk image you downloaded) to reload onto the iPod.

With iOS devices there are a lot of issues that can be happening between iTunes and the iPod. Backups can take a very long time depending on the amount of application data or the size of the camera roll at the time of the backup. Troubleshooting these issues go from very simple troubleshooting steps such as updating iTunes and restarting your computer all the way to the more advanced troubleshooting steps. If you are getting an error code, this can help you determine the exact issue, there is a really great article for troubleshooting the iPod on apples support site @ http://support.apple.com/kb/TS1275

Some steps that you can take to help isolate the issue would be trying a different USB cable (if you have one) or different USB port (should be USB 2.0), if you are connecting to USB through USB hub or extender try plugging it directly in to the computer, creating a test windows user account can also save a lot of headaches by letting you know it is something specific to that user account, and trying to sync music on another computer. I would try walking through that article and if your still having issues after that to try contacting apple or setting up an appointment at an apple store to make sure there is nothing wrong with the actual hardware of the iPod. Best of luck