My short lived iPod Touch experience - constant crashing.

Question

Hi there, this is my first post so I'd just like to start by stating I'm in no way here to bash Apple. I think Apple offers a product that is mostly unrivalled in build quality and function. It unfortunate though that when things go wrong there is little recourse once beyond the warranty period.
So here is my story:
My brother bought an iPod Touch(2nd gen) around 2 years ago and in doing so I inherited his iPod Video(5th gen, which was bought the day it was released) and I was extremely pleased, obviously. The iPod video has performed flawlessly since day one and still works without a single error of any kind. That is what Apple is known for.
Ok, so back to the iPod Touch. My brother has now handed it to me telling me of it's problems. It freezes, gets a white screen, then you have to restart it, it's also sluggish. Now, this is the 32gb version and he's never been close to filling it. He just mostly uses it for the wifi. His pc is chunky and loud so he uses the touch when around the house. It rarely left his room in fact! So anyways I asked him why he didn't return it while it was in warranty and he said that because it was rare for it to crash and all he had to do was to reset it and it'd be ok. Quite frankly that's something I could live with too if it was rare. But recently it's terrible. You can't watch videos from youtube or from the ipod itself without it freezing. If you play songs you'd be lucky to get through a couple of tracks without it locking up. And this is after a billion restores. After reading this forum i'm starting to think it's ios4 that effed it up so bad. My brother took it to one of the genius guys at the apple store he bought it from just a couple of weeks ago and they said it was a hardware issue and offered about £50 off the cost of buying a new one as a solution. I'm glad my brother declined that offer because as we live in the UK we're covered by a great law... I'm sure some of you are aware of it. Anyways it basically says that the goods must be of satisfactory quality; fit for purpose and as described and they must be for 6 years from purchase. Now as Apple was both the manufacturer and retailer of the product I'm going to pursue either a full refund, replacement or repair(at reasonable cost if any free would be better :P as £50 discount is not reasonable) because this particular iPod was clearly not of satisfactory quality and now it's not fit for purpose. I was wondering how other people's experience of this has been? As I stated earlier, I love the Apple products and if I were a richer man I'd make one my main workstation too but this is unacceptable.
Much love,
Alberto.
P.S I decided to try the erase content and settings and understood from the warning that it would take around 4 hours. "That's fine" I said to myself and left it plugged into the power supply and went to sleep. It's 24 hours later the Apple logo with the progress bar at 2/3 full is still there. How long should this take? There was nothing on it before I started.

Answer 1

Ok, so an addendum of sorts.
I removed the power cable because I was moving to another room and I wanted it with me but I forgot to plug it back in so I'm going to presume that the battery ran out before the full erasure took place.
Restored a fresh ios4 etc. etc. and began to fill up the ipod. I also put a 3 part, 3 hour BBC documentary on there to test the video. Well, no surprise. It began to crash/freeze again with the default settings so I thought I'd try everything on at the highest and it did a little better. The strange thing is when I put the headphones I use on my laptop onto the ipod it worked like it's meant to work. It played the video without flaw until the batteries ran out. So now it's charging up, without the cheap-o Creative headset on and it's back to being a lump of poo. I mean it's actually worse than it was before as it now crashes at the initial unlock screen after it's booted up. So it obviously hates having to use it's own speaker and hates the earphones it came with. This makes no sense what so ever.
I'm still going to aim at a refund, repair or replacement because it's meant to just work. No excuses, no work around, just work.