If iTunes can play it then it should be able to convert it to the appropriate format (it may be slow). Alternatively there are numerous applications that will allow you to convert the video into an iPod playable format.
Does anyone know of a good, simple and fast program for converting xvid into MP4 for the ipod. Nero7 takes forever, I have tried searching on this forum for answers already BTW. I'd want something that is quite configurable (is that a word? ) preferably.