Many Windows XP users customize the Local Services that run on their system to improve performance. Having the Local Service called "Terminal Services" disabled in Windows XP will prevent iTunes from recognizing your iPod.
After your computer has restarted, the service "Terminal Services" will be running. When you reconnect your iPod and open iTunes, your iPod should be recognized.
Note: Mac users click here if you're experiencing a similar issue on Mac OS X.
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