Despite the fact it's running just fine for you.
My kids throw my $600 32gb iPad 1 around the house like a frisbee because ITunes won't let me install previous iPad1 compatible app versions despite the fact they would still run flawlessly.
My alternative? Buy a new iPad. No thanks. I'm done with Apple. With a $400 win 8.1 tablet I can run "apps" from 1980s DOS all the way up to today and nobody is going to say "this is no longer compatible with your machine."
I have no problem with software and hardware progressing, but it's annoying when a company no longer allows you to re-install old versions that once worked perfectly. As soon as you "restore" your iPad all your old apps are wiped..for your convienience, and now require the new IOS...new iPad...to run.
That would easily be the problem with your iPod. ITunes knows it's old, and won't support it, there is no way to go back to an older iTunes version that would support it, so congrats, you get to buy a new iPod!!! Fun!