The trouble started when I tried to update my software version....

I am still very new to all the iPods.  I have a Nano that I haven't had trouble using with iTunes.  Now I recently bought a Touch and am very confused using it with iTunes.  From what I read I can have both the Nano and Touch on the same iTunes account.  If that isn't correct please let me know.
My trouble right now started when I tried to update the software version.  When I try to, a message pops up telling me there are items on there that have not been transferred to my iTunes library and that I should do that before updating.  So, I went to File and tried to transfer purchases.  Another message popped up telling me items purchased could not be transferred because I am not authorized for them on this computer (same computer we have always used for the Nano).  So, I then went to Store and clicked Authorize this computer and got the message that it is already authorized.
Now I have no idea what to do.

- Yes you can sync more than one iDevice to a single computer and iTunes library.
- Try deauthorizing and then authorizing the computer.
- You are authorizing the computer for the account(s) used on the iPod, right?
- Try resetting the iPod. Nothing will be lost.
Reset iPod touch:  Hold down the On/Off button and the Home button at the same time for at
least ten seconds, until the Apple logo appears.

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