A moderator for Apple’s Knowledge Base discussion forums weighed in on whether iPod Software 2.0 would be compatible with older iPods, and the answer is NO:
“iPod software 2.0 and its features are only compatible with new iPods.
iPod software 1.3 allows existing iPod customers to play back AAC music purchased from the iTunes Music Store or ripped from a user’s CD collection on their iPod.
Gayle
AppleCare Discussions”
(Thanks to iLounger huggies for pointing this out.)
