You can not downgrade firmware in iTunes 7.7, you will need to downgrade your iTunes first.

1. Download iTunes 7.5

2. XP: go to C:\Documents and Settings\USERNAME\My Documents\My Music\iTunes

Vista: go to C:\Users\USERNAME\Music\iTunes

• Rename  the file iTunes Library.itl to old.itl.

2. UnInstall your current iTunes. Start>Control Panel>Uninstall programs

3. Once iTunes is uninstalled, reboot your PC. Install iTunes 7.5.

4. Plug in your iPod - You will get an  error says something like “iPod can not be used because it requires iTunes 7.7 or later.” Just click ok

5. Now Put your iPod into DFU mode.

• 1. Connect your iPod touch/iPhone to your computer with the USB cable.
• 2. Hold both power and home buttons at the same time and count to 10 (1 onethousand 2 onethousand etc. )
• 3. Let go of the Power button, continue to hold the home button until the iPod/iPhone connects back to iTunes.
  • Be patient it can take some time sometimes while holding the home button. Also if your iPod/iPhone shows the connect to itunes symbol, your are not in DFU mode. It should look like the device is off.

6. Once into DFU mode, hold the shift key then click restore and select the 1.1.4 firmware. ( if you do not have the 1.1.4 iPod firmware you can download it here) (iPhone users - search their site! :))

Once done upgrade back to iTunes 7.7 and delete the iTunes Library.itl and rename old.itl to iTunes Library.itl and you will have all your songs back.