Having trouble updating with iPod mini

Ok pretty simple problem, i tried everything and nothin gworks. It just wont update, i go to the new updater 2005/09/23 and i have the option to either Update or Restore. Update is in a grey colour, it wont let me click it. My ipod is hooked into my computer and says do not disconect, if i do disconect it or safely disconect it (by using the safe disconect thing on the small icon things on the right hand bottom of the screen) it will not play. It keeps having an Apple logo and an error folder picture. Both pictures rotate back and forth, i am having alot of trouble, never had this kind of trouble before and i cannot return this ipod so i must fix it on my own. Plz any help would be very much appreciated

Could you take a couple of screen shots to help us figure this out. So it wont let you update, that is grayed out. You could restore and start from scratch but it sounds like you dont want to do that for some reason. Also play with your preferences some maybe.