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To update or restore an iPod, you first need to download and install the latest version of iTunes. Update refers to the process of simply updating the software that controls the iPod and doesn’t affect the stored data. However, restoring an iPod implies erasing all the data from it and getting it back to its original factory settings. After restoration, you need to use your recent data backup or commercial iPod Data Recovery applications to get the lost data back. But at times, you find errors while trying to update or restore your iPod.

As an example, when you try to update or restore your iPod using iTunes 7 or later, you might receive the following error message:

“iTunes could not contact the iPod software update server because you are not connected to the Internet. Make sure your Internet connection is active and try again.”

This error is specific to Windows Vista installed computer systems.

Cause

As suggested by error message, this error occurs when Internet access is not available that could download the available updates for iPod. In some cases, the reason could be faulty LAN settings.

Solution

Try resolving the existing issue by following these steps:

Make sure that the Internet access is available

If you can connect to the Internet using Internet Explorer and access the iTunes Store, use these steps:

Launch Control Panel using Start menu

Next, you need to open Internet Options control panel

You should then click the Connection tab and click the LAN Settings button

You can then select the ‘Automatically detect settings’ checkbox. Click OK in both of the windows that appear

You can try again to restore or update your iPod by reopening iTunes and connecting your iPod. It should be successfully updated or restored.

If you have performed iPod restoration, use your existing backup to get the lost files and folders. If in any case, you observe that data backup cannot give the required data, it is suggested to use iPod Recovery applications. These are special purpose iPod Data Recovery applications designed to offer effective lost data recovery from crashed iPods.

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Source: http://ezinearticles.com/?iPod-Error—iTunes-Could-Not-Contact-the-iPod-Software-Update-Server&id=2579460