Can I do a complete wipe and re-install of original iPod software

Hi,

My iPod classic will not sync with iTunes, when it is connected to any Mac it crashes the iTunes and needs to be removed with out ejecting as the system cannot unmount the unit. I have been to my local Apple store and they have told me it is a software issue and I have to give them the unit and £90 to get a new one as it is out of warranty. I wouldn't mind doing this but it worked fine until I restored it through iTunes, or it was a hardware problem, but it's just software. Why can they not just plug it in and rewrite the software?