IPod Touch Greyed out ' No wi-fi '

My iPod touch 2nd gen, 8gb, mc model, 4.2.1 software version isn't able to connect to wi-fi as the 'wi-fi' setting in 'options' is greyed out. Iv'e reset the network settings, reset all settings and reset all content and settings yet NOTHING? However i did accidentally water damage it about a year ago and it didn't even turn on so i just left it at that. Come a month or 2 ago and my ipod all of a sudden turned on?, everything on it was working fine which puzzled me quite a bit. Then come about a week after, my iPod went into restore mode all of sudden, so i turned turned it off, turned it back on and it kept saying i have to restore so that also puzzled me. My wi-fi may work once or month by restoring it but it doesn't stay like it. What could possibly be the problem?

If you feel that the software or firmware is the cause of your issue you should DFU restore your iPod. A DFU restore allows you to replace both the software and firmware that was altered during your software update.
To put your iPod in DFU mode:
1. Connect your iPod to a computer with iTunes installed
2. While the iPod is connected to the computer, hold the sleep/wake button and the home button at the same time for 8 seconds.
3. Let go of the sleep/wake button and continue holding the home button
4. A dialog box will appear in iTunes stating that iTunes has detected an iPod/iPhone in recovery mode if you were successful.
Then all you need to do is click OK, then restore the iPod.

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