Update new iPod 5.0 to new iOS 7

Just got replacement iPod 5th gen. When I try to back up it says the iOS's are not compatible. How do I up date to new iOS so I can restore?

You first have to update the iPod. Then you can restore from backup. It appears the backup was made with the iPod on greater than 7.04
I would go to Settings>General>Software Update
Or you can update via iTunes.

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