HELP! My iPod has some major problems and the warranty just ended!

My 20 GB iPod is about a year old since I got it for Christmas last year. I have never had any problems with it. Now about a week ago it went completely haywire.
It started when I went to play some songs. They would play for a few seconds and then it would freeze. It then got to the point where the songs would remain on 0 seconds, not playing. I tried doing the reset thing suggested on Support, but it just made things a whole lot worse.
Now, whenever the iPod turns on the Apple logo appears and then it goes straight to the folder with an exclaimation point. The hard drive also makes strange noises like it is booting up and then it makes strange clinking noises. Trying everything, I decided that I would hook it up to my pc and do a restore. Well, the Do Not Disconnect screen appeared on my iPod but nothing happened on my pc. It wouldn't recognize the iPod.
I was just wondering what could have possibly happened since it has worked fine for a year. The only things I could think are the new iPod update (11-17) that I decided to use about two or three weeks ago. Maybe the cold temperatures had something to do with it? Maybe I just need a new battery?
Should I take the iPod to my local Apple store? I don't know if it would be worth getting it repaired at a cost of over $250.
  Windows XP  

Corey, I just had the exact thing happen to me today. I've spent hours toying with it by following all of the recommendations on the support site - no progress.
I didn't do the software update prior to the problem occurring, so I'll bet that has nothing to do with it.
Do you have any other ipods running off of the same PC? My wife recently installed her nano on this same PC.
It did dawn on me that the problem started on Jan 1, but it might just be coincidence - I'm like you - I'll take any clues.
I get one break, though. Mine was purchased 10 months ago.
ipod 20gb    

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