IPod hard drive audible from across the room

I just received my first iPod, a 30GB Gen5, this evening and installed the proper software, connected up, and waited for a while. The flashing "Circle Slash" DO NOT DISCONNECT appeared and stayed like that for about an hour. I thought it was charging and/or syncing my iTunes library. When I returned after an hour, I waited a bit longer, and noticed that the battery icon indicated a full charge, but the DO NOT DISCONNECT message was still there with the flashing icon. Finally I unplugged the iPod, and heard grinding, clicks, and every now and then an abrupt "thunk". If I held the iPod in the palm of my hand, the "thunk" felt about like it sounded.
After a bit of this grinding routine, the menus came up and I could navigate around OK, but none of my iTunes library was there, and in fact the iPod was never detected by iTunes. Upon further disconnects/reconnects, every now and then my G5 DP 1.8's Finder would indicate I had connected a volume not readable by OSX. Grind...grind...grind...THUNK!
I tried to restore the iPod using the iPod updater, and the updater is currently in a frozen state until I force quit it.
I think that on the basis of the noises it's making, can I safely assume that this iPod has an unhealthy hard drive and should be returned? I've asked a Mac friend of mine (my boss actually) if any of his numerous iPods ever make noises like that, and he indicated no.
Any suggestions are appreciated...thanks.

This is not normal. It is better to have it checked. Take it to the Apple Store.
Best.

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