OK - back on topic... I went to the source - the Apple iPod Touch Feature Guide -
http://manuals.info.apple.com/en/iPo...ures_Guide.pdf
Quote:
From page 88:
If you can’t remember your passcode
You must restore the iPod touch software. See “Updating and Restoring iPod touch Software” on page 89.
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As I understand it, the passcode isn't designed to "brick" the iPod Touch if stolen, but rather prevent anyone from getting access to what you'd consider important personal information (e.g., email accounts, credit card info, etc.).