Brand new iPod corrupted already?  I need help please

Hi,
I use Windows XP Pro, have the latest updates for iTunes and supposedly the iPod updated last night. I am getting the following messages: During a "Restore" session I get:
The iPod "iPod" could not be restored. An unknown error occurred (1418)
Followed by:
iTunes has detected an iPod that appears to be corrupted. You may need to restore this iPod before it can be used with iTunes. You may also try disconnecting and reconnecting the iPod.
Which I have done NUMEROUS times. Don't have this kind stress with the creative products. I love the mp3 player but LOVE iTunes more so broke down and bought a 2 gig, 2nd generation iPod and I've gotten absolutely nowhere. I'm about ready to box it back up and send it back to Amazon.com, what a stressful mess this is.
Come on Apple, fix your software for crips sake because I seriously doubt it's the hardware!!
Suggestions welcome. I've already read through as many threads as I think might be of help like the 5 "R"s and so forth, nothing is working!
Thanks
Richard

Update... reconnected, reformatted after reading more ideas and still can't get past the errors.
Now I have it connected to the computer, no back lighting (kinda lame), which shows a "do not disconnect" message, there's a little icon up in the upper left screen spinning around.
I do not have iTunes running at this point so I'm not sure what it's doing. In a loop of some kind perhaps?? Not sure.
I've also checked in with Amazon.com to make sure I can return this product... I can... thank god.....
Still very open to help if someone has any other ideas. I see quite a few views but no responses.
It's a Nano by the way...

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