IPod Touch Shuts down and Wifi stops working

I am having a huge pain in the butt issue. I loved the iPod touch for the first year I had it, after which I had a problem, but that was fine. I was in warranty and got a new one. A year later now, I am having another issue. It seems like the things are disposable! Not too impressed with Apple.
My iPod will shut down on its own every couple of days completely on its own, which I have heard is a common problem, but when I turn it back on, the date is set to December 31, 1969 (I believe this is the beginning of the Unix Calendar?), but everything else appears to be working. When I launch any apps that require wireless, they appear to work fine, but nothing loads. i.e. Safari loads the bar part way, email continually loads, but nothing happens, etc. The only way to get it back to normal is to go into iTunes and do a restore from a backup. I would like to go to factory defaults and start from scratch, but I have a tonne of data on there that I would need some way of getting off safely. I should also mention that when the iPod shuts down, the only way to restart it is to plug it in.
I can't seem to find anyone else who has had this problem. I would appreciate any help!
Thanks,
A

Thanks for the tip so far Lucas, but i am stuck at the "Connect to iTunes" screen of the recovery process. when i try to restore i was prompted that "The Ipod Software Update server could not be contacted". I am currently at work so i am wondering if i am being blocked from contacting the server because of the firewall and other network security measures. But again thanks at least i have some level of hope.

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