ITunes misinterprets size of iPod...

I have a 20gb 4th gen iPod with a click wheel and for the last 2 years it has been working fine. Now, I think since the iTunes 7 update iTunes thinks that the iPod is bigger than it is...
For example on the special iPod info page in iTunes it says at the top that the iPod's capacity is 18.60 GB which is correct due to formatting etc...
BUT, at the bottom of that page with the coloured bar representing the data/music etc. it thinks that the iPod is has a capacity of 20Gb which is clearly not the case, currently it says that 18.83Gb is Audio and 1.07Gb is free space. The problem with this is that when updating the iPod, iTunes still 'thinks' there is space on the iPod so continues to put new songs on. But it silently deletes other songs from the iPod, so although they show up when browsing through the menus, they do not actually play (by the way the songs that don't play are random). They play perfectly in iTunes though.
I have overcome this with certain songs by unchecking the box to update them, syncing my iPod, then ticking the box again and syncing my iPod. The song then plays, but probably another one will not play... This is obviously impracticle.
Any ideas for a solution?
Cheers

When I turned on my computer, it said there was an error and the Itunes dissapeared!!
So I installed version 6.5 all over and I don't have ANY songs on it!! If I plug in my ipod, will the Itunes reset it???
PLEASE HELP!! I don't want all of my songs to Disappear!

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