Going from 5th Generation iPod to iPod Touch

I currently have a 5th generation 80gb and I am getting a new iPod Touch 32gb. I am selling my old iPod to a friend. My questions are as follows:
1. Before I sell the old iPod, I need to restore it to original factory settings to wipe it clean,correct?
2. Will he have problems getting my old iPod to work with his account?
3. Are there any special settings or setup I need to perform to get iTunes to recognize my new iPod Touch with my iTunes account?
Thanks for any help as I could not find an answer in the help section.

*1. Before I sell the old iPod, I need to restore it to original factory settings to wipe it clean,correct?*
Correct
*2. Will he have problems getting my old iPod to work with his account?*
There's no reason he should if the iPod is working ok for you
*3. Are there any special settings or setup I need to perform to get iTunes to recognize my new iPod Touch with my iTunes account?*
No. You just need to connect your new iPod. If the songs you had on your previous iPod are still in iTunes they will load onto your new one. Follow the on screen instructions to name the iPod and automatically sync your songs and videos onto the fresh installation. Press Done and the iPod will appear in iTunes and start to sync. If you want to update manually or using selected playlists uncheck the box beside the sync automatically instruction and press Done, it will default to manual mode and you can choose whatever setting you like.

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