Some time back I pulled the 'old wash yer iPod' trick.
After cosiderable drying time, everything except the motion (rotation) detection has come back, albeit the backlight only works when it chooses to do so.
Without backlight it is pretty much useless, or so I thought.
I went into the iPod using Finder and deleted everything I could find, btw, this is a 16GB nano.Next I used SuperDuper to clone my startup disk to the nano, (my boot disk is just over 12GB).
Now who of thought, my system now has an emergency bootable drive from which I can run various utilities etc.
Now for the next experiment, let the battery fade, which I'm sure will happen, and see if my Mac will still recognize the unit.

Good idea. Did you actually try booting from it though? In the past I've heard stories that the iPods could not actually boot a Mac. I've never tried it myself.

Regardless, you would still have a backup of your files using this scheme.

Good idea. Did you actually try booting from it though?.
Oh Ya, first thing I did before making the post.
Boots just fine, just a little slowly.

Cool. Maybe I should do something similar with my wife's idle 30GB video iPod.