I'm having a similar problem on my 30GB 5.5G iPod.
If I try playing a no-DRM iTunes-encoded AAC through the database menus, and it is the last song on a list, or the only song on the list it will flash the actual file name (a random iTunes string ie: SHDS.m4a) and go back to the menu. This is with repeat off, and no song already playing.
With repeat on, it acts as if the song has been successfully played through.
When there's already a track playing, everything seems to work fine.
I cannot see any error message, and the same file plays fine through the Files menu.
I'm using r16342-080218, default settings (with the exception of repeat being disabled)
If there are any files or data you'd like me to upload or provide, I'll do my best.