I had a weird problem with my wife’s iPod recently. When I connected it I got and error saying “iTunes has detected an iPod in recovery mode – Use iTunes to restore” but if I logged into the PC as myself it worked fine.
It turns out that it was a drive mapping problem. My wife had a network drive connect to E: and the iPod was trying to use the same letter. I guess I don’t have that letter mapped when i log on. I simply remapped the drive and it started working OK.