The reason you are encountering this error is strictly related to the hard drive. Although it has been replaced with a new brand, it seems that the iPod has incompatibility issues or the hard drive is faulty (not compatible). You can try to restore it in iTunes for as many times as you want and it will give you the same errors over and over again. I have looked for an additional solution and I should say that the approach to the problem is somewhat different.
Please follow these steps in order to fix your problem:
- Enter Control Panel > Administration Tools > Computer Management> Disk management and identify your iPod partition.
- Right click on the volume selected containing your iPod partition and click format.
- Select Quick format as an option and NTFS as partition file system.
- Now the iTunes will simply detect your iPod telling you to restore it and perform the operation. If it fails with the same error, try to restore it once more and it will work.
You iPod will be restored to its working parameters with all the space available. Next the iPod will restart and then you'll find yourself at the setup screen where you can configure it as you please.
