So TechMan finally got around to installing the new iPod 2.0 software on his iPod Touch and it wasn't flawless.
First I downloaded the the new iTunes software, which went fine. Then a few days later I tried to install the new version of software for my iPod. Every time I hooked up the iPod to my laptop, iTunes would freeze up.
After this happened a few times, I thought maybe the problem was that I did the process in two steps a few days apart. So I uninstalled and reinstalled iTunes with the idea that the new iTunes would already have the updated software (you can do this without losing content). This seemed to do the trick.
This could have been just particular to me, and I mention it only in case someone else has the same experience. Everything seems to work fine now, I was even able to donwload an application from the App Store.