My iPod touch 4g has died, I tried to recover it, it won't work?

I saved up for 6 months for my ipod touch 4g and paid 170 pounds for it. I was very pleased with it, but now it has just gone out of the 1-yr guarantee I am experiencing problems:
First, a sign came up saying "No more iCloud storage is available" and I clicked "OK". Nothing happened, I clicked it again and again and the other option, "Settings" and nothing happened.
Then I had to put it into Recovery Mode. I synced it to my old Sony VAIO PC, and started to return it to its factory settings (after I'd saved all the photos and apps). The procedure for setting it back to factory settings reached about 3/4 of the bar, before stopping and going back to 1/2, then to 3/4 of the bar again, back to 1/2, and so on. It keeps doing a Software Update again and again.
Now i'm just waiting for the battery to die out, and then maybe try it again. I can't switch it on or use it, it just says Connect to iTunes which I've already tried several times.
I don't know what happened to the iPod. I'm a kid, I saved up for this iPod with my own money, and now it's been taken away from me.

Maybe:
Restore loop (being prompted to restore again after a restore successfully completes)
Troubleshoot your USB connection. If the issue persists, out-of-date or incorrectly configured third-party security software may be causing this issue. Please follow Troubleshooting security software issues. .
Next try placing in DFU mode and then restoring.
How to put iPod touch / iPhone into DFU mode « Karthik's scribblings
Then try restoring on another computer.
Last, make an appointment at the Genius Bar of an Apple store.
Apple Retail Store - Genius Bar
Yu said "it just says Connect to iTunes which I've already tried several times." Just what happens when you restore via iTunes?

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