I have posted the solution to this on another thread but here goes, although you've fixed your problem, it serves for others:
Totally drain the iPod, until it turns itself off, then plug in and charge - don't worry about the monochrome battery indicator, its because it doesn't have enough charge to swich on, it will after a while - charge it for 4 hours regardless of whether the 'charged' symbol is displayed - this is the little plug btw.
Once your 4 hour charge is finished, just use it as normal, but run it down completely again. But this time, when charging, keep an eye on how long it takes to display the 'charged' status. If it's about 3-4 hours, then the battery indicator and charging times are synced.
If this is the case, then take a look at Apple's tips for prolonging battery life. But as a general rule, charge when ever you want, but Lithium batteries tend to dislike regular full discharges, I charge when theres about 40% battery life left.
However, if after the first charge, it still is displaying before 3-4 hours, then do ANOTHER full discharge and 4 hour charge. Repeat if needed, until the 'charged' symbol is displayed arounf the 3-4 hour mark.
Hope this helps