It's asking for my wi-fi password, maybe it has something to do with my wi-fi set up here at home, since I bought the ipod when I was away, and set everything up on another person's network?
Do you know the password for your wireless network?
If not, what kind of wireless router do you have? Brand and model would help.
It should be possible to connect to an IP address such as 192.168.0.1 192.168.1.1 or something similar so you can update your router with a password that you know.