IPod with folder icon, won't reset

I bought my third iPod at the end of summer, an iPod photo 60 GB. It has worked perfect until 2 days ago, when it suddenly froze. I rebooted it, but the display showed a sad iPod. Checked the support files and tried to put it into Disk mode, but it didn't work, so I just left it in the charger overnight, which, surprisingly enough, managed to solve the problem for a while. When I woke up, the iPod was OK.
So I took it out for another day of adventures. At first it skipped all of the songs from an album that I had recently transferred to my iPod, but it played older songs. But after maybe 20 minutes, it froze again. Another reboot and another sad iPod icon. This time, however, I managed to put it into Disk Mode, and restored it to factory settings. It didn't restart itself after the restoration (waited for an hour or so), so I manually removed it from my desktop and unplugged it. On the screen there is a folder icon with an exclamation point. Replugged it, and it appears on my desktop and in iTunes, and starts filling up with songs. When it's finally done I remove the iPod from my computer. Once again I see the folder icon.
Each time I connect the iPod to my iBook it's on my desktop and in iTunes. The software can't be out-of-date because there hasn't been an update since I bought it.
Restoring it to factory settings shouldn't have harmed the iPod - or should it?
It's charged, it's filled with music, at least according to iTunes. It's just that STUPID folder icon that I can't get my head around. Why is it there and what can I do to get rid of it?

Well, here are the two pages that might be useful to you:
iPod does not appear in iTunes or on the desktop, an exclamation point or sad iPod icon appears onscreen
iPod shows a folder icon with exclamation point when you turn it on
Those give some possible ways to deal with the Sad iPod/Folder problems. The first step in the Sad iPod steps involved putting it in disk mode:
Putting iPod into Disk Mode
If you can get it into disk mode, you may be able to get your music off. I hope so. But I also hope that if you do, you make sure to have a backup of all your music; since Apple only allows one download, it should be protected as any other investment would be.

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