A lot of people were unable to update their iPods using Apple's latest iPod Updater 2004-04-28. It would say "Please plug in an iPod to update it" even if your iPod was clearly mounted on the desktop. Apple posted a fix for this here.
I was able to update my iPod without following Apple's advice, by using the updater on a different mac which had recently been wiped and has a fresh copy of Panther on it. It probably worked because the version of the /System/Library/Extensions/iPodDriver.kext
is new, whereas my system probably has an old copy. But if you don't have a fresh mac laying around, you'll have to follow Apple's advice.
Mac OS X Hints
http://hints.macworld.com/article.php?story=20040430081025850