Apple suggest using the utility when your i Pod can not play music, has stopped being recognized by i Tunes or is identified as either a device in "Recovery Mode" or a "USB DFU Device".
If you're having issues with either a 1st or 2nd generation i Pod Shuffle than this utility should work a charm to restore it to its factory settings.
i Pod shuffle (2nd Generation) The restore process completely erases all music and data on your i Pod, and installs current i Pod software on it.
For detailed information on this Update, please visit this website:
Restoring your i Pod erases all of its data and settings and returns it to the state it was in when you first got it.
After it's been restored, then you can update the operating system.
Today when my girlfriend went to bed, she screamed “Can you come over here, my i Pod’s flashing! I took the device and indeed it was flashing red and green accordingly.