It appears that the latest iTunes 7 on Windows XP can not update iPod Shuffles (the small one with no screen). When I had trouble, I looked on the web and found lots of irate owners with the same problem.
Avoid iTunes 7 and iPod shuffle on Windows XP!! Stick with iTunes 6 for now
What I gathered from looking at all the complaints and the timestamps we have:
1. Apple says there is no problem.
2. Apple says problems are due to the "Buggy Windows XP" system
3. Apple says that the Services on Windows XP is all screwed up.
4. Apple says the original iPod shuffles are at the the end of their production life cycle so buy a new one which does work.
5. Apple says wait for the next update of iTunes that will, maybe, fix the problem.
I managed to get iTunes 7 off of my machine and reinstall version 6 that I had hanging around. It took a long time to clean up the mess left behind because of the incomplete uninstall function of version 7. After about 1.5 hours, I was back in business again, cleared the iPod, and reloaded the music.
Some Mac owners have the same problem but their numbers seem small compared to the Windows users.
I bought the iPod in spite of all my experiences with really bad Apple products while at my former job. Hardware problems, buggy software, non-responsive Apple service... My latest foray at a day long seminar with the new Macintel machines was really less than satisfying. I should have known better than to buy an iPod rather than another player! My fault for buying an Apple product, their fault for the crappy service and software. Proprietary hardware, proprietary software, and still no basic QC testing.