Nano doesn't work and itunes in restore/recovery mode loop

My ipod nano 1st gen was fine (XP pro) - and then I plugged it in and it says "Itunes has detected an Ipod in rocover mode. You must restore this ipod before it can be used in windows."
I press restore and it seems to be restoring - and says its restore...but then it starts from square one and says it has to be restored again.
When I unplug the nano it says "do not disconnect"...but then it says "use itunes to restore".
I updated my itunes, restarted, etc. and still get the same.
Someone said something about changing the drive letter or drive mode...but i cant do that! please help.

Have you tried?
http://docs.info.apple.com/article.html?artnum=93499#changedrive

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