If the hard drive (ipod) is corrupt then reformat it to FAT32 with a suitable program, I'm not sure if Windows Disk Management worked for me when I tried ages ago as it's an external device, but you can google it and have a go with that or something similar like Partition Magic. Once it's formatted disconnect from computer, put the ipod into recovery mode (aka disk mode(also google that)) and then with itunes running, reconnect and hopefully with itunes recognising it, it'll prompt to restore the ipod, do that and with a bit of luck it'll work. If it's still not working after that, then I'd suspect a dead hard drive which you can pick up from ebay for a reasonable price and fit yourself using 'How-To videos from YouTube'.
Good luck.