I would personally just keep the iPod, and make no effort in looking for the original owner. It's not that I'm heartless, far from it, but if you're carrying around a 250$ music player you should just keep a better eye on it.
Taking it to the police also wouldn't help much. How many people actually reclaim found items from the police? I think these cases can be counted on one hand.
That said, I wouldn't sell it either. I would keep it just as a collectible.