All my music disappeared, but not really??

Hello, having a really bizarre problem with my 5th gen touch and not sure what to do. Any help would be greatly appreciated.
When I updated my touch to 8.0, for some reason my ipod decided to stop displaying all album art. I couldn't figure out how to fix it, so I just began manually re-adding all of the art.
At some point during this process, itunes froze for a little bit and then it showed my ipod as being way over capacity, and all of the data being 'Other.' When I navigate to the music section on my ipod, it's completely empty - nearly 60gb of music gone.
However on itunes, it's still showing all of my music there, but the data is still showing as Other (no longer over capacity). I can play the music on my computer via itunes, but it's now showing on my ipod at all. I'm afraid to restart it or anything because I don't want to lose all of that music that I've spent years collecting. I manage my music manually so I have no library backup - I drag and drop everything onto my ipod via itunes.
Since the data is still there on my ipod, is there any way I can transfer it to my computer so that I can at least have a backup of my library while I try to figure out this problem? I'm on Windows 7 so I downloaded a program called Sharepod, and even though it shows my ipod as being connected, it's not showing any of my music on there (possibly because of this issue that changed all the data to Other?). I tried another program called AnyTrans and it showed all my music available to be able to transfer to my computer, but required a paid license to do so.
Does anyone know of a free program that will let me back up my library on my hard drive? And how could I proceed from there to fix this issue on my ipod? Would I have to restore?
Thanks again!
edit: ok, seem to have found a program that allows me to transfer all my music to my hard drive. Now I just need to figure out how to fix my ipod.
Message was edited by: jawgust

Hi - so restoring my iPod did not help.
First I restored from backup, which didn't fix anything, so then I restored completely. After restoring, I dragged all my music (about 52gb worth) back onto the iPod via iTunes. Initially everything seemed ok, but the next time I plugged my iPod into my computer, all the music showed up as 'Other' data in iTunes. Additionally, it got stuck in step 1 of syncing, and seemed to have erased a lot of the music off my iPod.
I restored yet again, put all my music back onto my iPod, and the same thing happened. My music is basically inaccessible, and it will not let me add any new music to the iPod - when I drag a track onto my iPod via iTunes, it gets stuck in a sync. The track is greyed out on iTunes and does not transfer to my iPod.
Does anyone have any idea what's going on with my iPod?

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