I had the folder with the exclamation point. I tried all the Diagnostics, which told me it was the Hard Drive. Then I read this on another site: "Open up the iPod, and place a folded-in-half business card (or equivalent substitute) between the outer metal (back)casing and the hard drive itself. This puts a small amount of pressure on the hard drive, and has permanently fixed every iPod I've tried it on."

In essence, the Hard Drive pins weren't meeting up with their connectors. I tried out the business card solution and IT WORKED!!!!