Based on your answer to @jwongrocks suggestion, it is clear that your battery is defective and has started inflating the protective pouch. This is not only a defective battery but it is now becoming a fire hazard.
You need to [guide|11809|open up the iPod], remove the battery (without puncturing it) and dispose of it safely (check your city or local hardware store). Note, the battery does require some soldering skills.
Once that is done, why not replace it with a [product|IF119-001|good battery] and revive your iPOd.