No Wifi in Apple ipod or itouch
It happens with some units for no specific reason. The WIFI suddenly stops working. If you go into Settings, then Wifi, if the words are "No wifi", your iPod has gone bad. Apple is aware of the issue but lack the ability to solve it. They recommend you upgrading to the the most recent 4.2 OS, however, many with the 2nd Gen iPod state that 4.2 OS ruins it even more in other ways. It is a major gripe judging from the blogs. If upgrading the OS fails, as a last resort, they tell you to restore to original settings (that will not change any upgrade to 4.2 OS) and check Settings again to see if WIFI is working.
If all else fails and if under warranty, Apple will replace it. Some feel that upgrading may cause the issue, others, feel it is Restore. However, beware that sometimes using "Restore" will actually cause the problem to begin with or make it worse. I had this experience, it worked fine until I decided to restore the settings to original, when I tried to use the WIFI afterwards, it said "No wifi". None of the solutions from Apple worked in my case.
Some owners have never had the issue, others, suddenly lose it and cannot get it to work. Obviously, the issue is hardware and maybe software. The problem occurs frequent enough to cause concern when you need to restore the settings or upgrade to OS 4.2 with a 2nd Gen iPod. This does exempt the 3rd Gen models, as the same issue occurs to them with no warning.