2 GB Nano claims to hold 500 songs, but mine holds 169. What gives?

My Nano is supposed to hold 500 songs based on a 4 minutes per songs. I have no photos on it, and my songs range from a minute to six. There is nothing on the hard disk either. The only explanation I can think of is the album art for each song, but still, with approximately 95% of the songs on my iPod having album art, would that cut down the amount of songs allowed on it by more than half?
Thank you for any assistance.

Bear in mind that the 500 song limit advertised is based on 4 minute per song, 1MB per minute, encoded as 128 kbps in AAC format.
Check the encoding of your songs. To do this, right click one the sorting columns in iTunes tick bit rate, then click this new column to sort the songs by bit rate. Any songs that are encoded at higher than 128 kbps will be causing excess space to be used for storage. To change the bit rate of these songs you can convert them to AAC format (sound quality will be lost). Or you can reimport them from CD/Computer once you have changed the import settings as detailled below, but that could be time consuming.
To convert go to the edit menu, select preferences, click the advanced tab, and select importing.For best song capacity on the iPod, make sure that the encoder is set to "Import using AAC encoder", and "High quality 128 kbps". Hit OK. Then collect together all the high encoded songs and select them all (click the top one and hold shift, then click the bottom one). Right click the highlighted area and go to "Convert selection to AAC". This could take a while if there are many songs.
If your songs are all changed into 128kbps and are mostly all around 4 mins long, then you should get very close to the 500 song limit Album art will take up space, but certainly wont reduce your capacity to les than half of the advertised limit.
P.S. If you prefer, you can also convert to MP3 format at 128kbps, since AAC encoded at this bit rate and MP3 encoded will be just about exactly the same in terms of size. It's up to you which you prefer .

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Correct me if Im wrong, but isn't this nano supposed to hold 500 songs?
Anyways, under the devices tab on my ipod it shows the capacity at the bottom, this is what mine says:
Audio-1.74 GB (419 songs)
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*Correct me if Im wrong, but isn't this nano supposed to hold 500 songs?*
The advertised song capacity of any of the iPods is a calculation based on 4 minute songs encoded in AAC format at a bit rate of 128 kbps. Longer songs and songs encoded at a higher bitrate or in uncompressed formats take up more space. If for example you were to import full size, uncompressed CD files (AIFF format) or WAV files you would get significantly fewer on. What format are the songs you have imported? Go to iTunes and right click on one of your songs, choose Get Info>Summary and look at "Kind" to see what format you are using. Remember too that if you are using a higher bit rate than 128 kbps even song files in ACC format will be larger: iTunes: About import settings and hard disk space
*What would be other?*
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2 GB Nano claims to hold 500 songs, but mine holds 169. What gives?

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