I loaded music by type - -since they did not have country, easy listening, or Rock I created my own - as per the instructions -- I added music from many different artists but the ipod groups them by album (maybe I need to learn more) and when I select shuffle, it only shuffles an album, not randomly selecting songs from all albums
I think I got you now. If you select your music from the Music/Songs or Music/Albums/All Songs you will see a Shuffle button at the top which will shuffle all music.
These "Groups" you made, where they "Genres" in iTunes? You can use iTunes to set the Genre of your music. Select all your Country music then right click one then choose Get Info. Down at the bottom check the box beside Genre then select the one you want it the drop down box. Once you have done this re-sync the touch for the changes to transfer. You could then select these on the iPods Music/Genre menu, select one, then All Albums, All Songs and you will see the Shuffle button at the top.
To get the best out of your touch make sure your music is properly tagged with Song, Artist, Album names and the Genre filled in. You will find a multitude of different ways to play it once you find your way around the menus.
If you only want selected songs on the touch your best bet is to set the iPod to sync to selected playlists. First create the playlists in iTunes with the music you want. You can add music by many methods, drag and drop it from the music library is the easiest. A song can be in 2 different playlists however only 1 copy of the song will transfer to the iPod. You can create folders in iTunes to hold multiple playlists to keep things tidy.
Once the playlists are created select you iPod in iTunes, then the Music tab in the right pane and set it to sync selected playlists. Select the playlists or folders of playlists you previously create in the box.
Now you can add and remove music from the touch by adding or removing the songs from the playlists in iTunes. You will need to sync the iPod after the changes have been made to the playlists for them to be tranfered to the touch.