I had the same problem.
I would restore, etc.. reboot the ipod, all those things.
When it would come up to select the language, it would not accept any input from me other then rebooting it.
I read all over the place, didn't find anything to help.
Finally...
I held the ipod in my right hand, holding the screen side with screen facing up.
Then I slapped it on my leg, like a whipping/flipping action.
Next thing I know, everything worked again!
I can't believe it, but this worked for me as well!! My Nano 4G is now once again functional. Thank you.
This seems like something Apple needs to address......and not by simply recommending slapping it against your knee.