I highly recommend the shields you can buy from shieldzone:
http://www.shieldzone.com/
They work amazingly well (I currently have one on my camera's screen as well as my phone's). I've not tried their applesauce product to repair the scratches first, but once you've got it back to new I'd recommend buying a full-body shield for the iPod. You can see it on because it makes it slightly more shiny, but the screen it still exactly as sharp and clear, and so far nothing I've tried can scratch it (though I haven't exactly gone out of my way to scratch my stuff...)