IPod in recovery mode. You must restore this iPod before used with iTunes

I just got iTunes 7 and when I plugged my iPod (5G, 60gig) into the computer it is recognized by Windows XP as a removable device as usual and also by iTunes as an iPod. However iTunes keeps displaying this message each time the iPod is connected:
iTunes has detected an iPod in recovery mode. You must restore this iPod before it can be used with iTunes.
I restore the iPod and it says it's updated and the player is ejected, but my iPod seems to be in disc mode, and when re-connected iTunes gives the same message. I looked around for solutions to this and the only thing I saw was that the drive may be improperly named, but I've double checked and am quite sure that's not the issue.

it sounds like you've already seen this document, Emma:
"iTunes has detected an iPod in recovery mode - Use iTunes to restore"
... a few preliminary questions (thinking they might help with trying to identify other possible causes of this).
what make and model is your PC? is it a desktop or a laptop?
if you plug the ipod in to a different PC (with itunes 7.0.x installed), do you get the same message from that itunes?

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