Here's the exact scenario with it: 1) Ipod connected successfully to iTunes. 2) Drag song from Library(in AAC format) to My Ipod. 3) Song plays successfully in iTunes. BTW: This is one of the songs from my cd. Not bought. 4) Eject Ipod. 5) Find song in

Question

Here's the exact scenario with it:
1) Ipod connected successfully to iTunes.
2) Drag song from Library(in AAC format) to My Ipod.
3) Song plays successfully in iTunes.
BTW: This is one of the songs from my cd. Not bought.
4) Eject Ipod.
5) Find song in Ipod and press play.
6) Display for song and time appear.
7) About 1/3 of a second of the song plays, then it cuts out and restarts itself. (boots me back to apple logo)

Answer 1

Nope - and it was set to not look for them.
The final clue came when I tried hooking the drive directly to the computer, instead of to the airdisk. iTunes still hung. Then I disconnected the drive and tried to run it, and iTunes came up right away - but with an ! next to each song. Clearly it was trying to find/touch every file in the library on first startup.
I didn't try plugging in the drive and leaving the hanging iTunes running for more than a few minutes, so it's possible that it would have recovered and launched. But after removing the XML file, restoring the library to my pre-7.7 version, I could hear it accessing the directly attached drive (and see it in disk activity in the monitor) for a few minutes (less than I'd left the hanging one trying), before it came up.
Conclusion:
1) 7.7 is definitely trying to touch/see all the files in the library on first launch (proved by the ! when they are missing).
2) Disconnecting/interrupting the touch/see MAY have corrupted something (can't prove it).
3) Since touching 10,000 files takes a LONG time even at 802.11n speeds (let alone b or g), it's worth the hassle to plug the drive in directly for the first time.
4) Patience is a virtue