Can't get past "Formatting"

Just bought a new 20gb iPod Colour and was all excited to get started...I'm not too familiar with the ins and outs of computers other than the basics and so didn't realize my laptop only had USB1.1...after reading all the posts I have decided to get the firewire installed but in the meantime decided to try to at least install iTunes on a Dell desktop I am currently borrowing that does have USB 2.
Here's where I start to run into problems...I have gotten as far as plugging in the iPod. It is recognized but tells me it needs to be reformatted. It runs through the progress bar once in "formatting" mode and then half through the next bar before it comes up with "There was an error communicating with iPod. Please disconnect and reconnect iPod. Disregard the 'Do Not Disconnect' message on iPod's screen."
I have disconnected and reconnected many times and have tried resetting the iPod and starting all over from the very beginning but get hung up at the same spot every time.
Can anyone tell me if they think this is a USB problem or a problem with the iPod itself?
I have no problems with sending it back, but don't want it to be my brain that's not working, not the iPod...
I apologize if this has been covered in an existing post but I think my eyes have glazed over trying to figure it out with a non-computer-savvy brain and I've probably missed it.
After reading about a million problem posts I'm almost starting to wonder if it's all worth it.....

Try going completely through the install from the cd, when it says to plug in a ipod, there is a checkbox to go around that.
When it finishes go to Start -> All Programs -> Ipod -> iPod Updater. Run that program and don't plug the ipod in till it prompts you, you might have to click okay on a window. It should detect the ipod, and you want to click the RESTORE button.

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