I have an I-pod nano 4 gb. What I think is going on is you are loading full "wav" files. The 500 songs is predicated on low quality "mp3" songs. Normally, I-tunes will convert the "wav" file to an "mp3" file.
Check your music files on your computer and assure they are "mp3" files. If they are make sure your I-pod does not have other "stuff" on it. Use I-tunes to reset it an "like-new" condition (that removes all files)., then use I-tunes to re-install your music.
If you are downloading files from the I-tunes store make sure they are safe so you do not loose your investment in tunes.
Since they are from cd's make sure the ripped files are safe, then try a re-install.
Should work.
Cheers
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