I believe it needs to be (ACC = itune format) or (converted = M4A format), not sure but I think if you do one of the options, it will ask to convert.
Oh and you have to use "itunes" or some other program that works, you can't simply copy from a windows pc onto ipod, that would be like asking Microsoft and Apple to be compatible. Also if you install itunes be careful, unless you know how to disable and turn everything off, it will try and turn your pc into a Mac.