It works for me just fine.
When you select the songs you want to extract, press the Extract button, a window appears, where you can set the filename structure.
It's in the top field called Filename Template and looks like this, when you first open it.
<artist> - <album>/<trackno> - <title>
You can adjust that structure with the help of the ? button on the right and can also choose several other templates.
I just downloaded that software, ran it and extracted an album (the soundtrack to Moon, bought via my iPod Touch) from the iPod Touch without any hiccups and the resulting files where stored on my Desktop in a folder called
Clint Mansell - Moon (Soundtrack from the Motion Picture) and had the names like
01 - Welcome to Lunar Industries.m4a.
I used the latest version of expod and Mac OS X 10.5.8 on my 2.0GHz iMac.
If that doesn't work for you could try
Senuti, which was free in earlier versions, but now has a 30-day trial to download.
I used Senuti with my earlier iPods (3G and 5.5G) and it worked fine.