iPod Nano - Strange Fault

Hi Everybody,
I have a iPod Nano (Out of Warranty), That has a strange fault. When you transfer stuff from iTunes (Like Music, Podcasts, Pictures ect.), It will get to a certain point (around 800mb) and then say "Attempting to copy to the disk <iPod name> failed. The disk could not be read from or written to."

and when you eject the iPod, it is in Recovery mode, and iTunes says it needs to be Restored, But this just goes around in circles.

If you load Diagnostic mode, the 'Five-in-one' Test says the iPod has about 1235GB of Space! So I either have a pile of crap or the biggest iPod in the world!

To get it working you need to play with the diagnostic mode and do a few resets, until it says 3.8GB and the plug it into a windows PC without iTunes (or without the itunesservice.exe and ipodservice.exe enabled) and format the drive and restore it with iTunes.

But it still only lets you store upto 850MB or So.

I have Access to a Mac or a Windows PC.

I have tried Formating, but to no avail.

I think the internal memory may be corrupt, so does anybody know a repair program that will work with USB Disks?

Anyway! Thanks! Ohh, and Merry Christmas!