What version of Windows is on the PC that you're using?
The bottom line is that it seems as if Windows is not recognizing the iPod as a proper external storage device. You could try to download and install the iPod Updater software (available from http://www.apple.com/ipod/download.html
) to see if that helps the computer recognize it.
Ultimately, as far as Windows is concerned, the iPod is just another external hard drive (specifically, a "USB Mass Storage Device"). However, if there are drivers missing in Windows itself that would prevent it from recognizing the iPod as such, then this would explain the problem you're having.