I think it's because the iPod has two partitions, which confuses the xbox. One partition is hidden and is where the Apple firmware is stored, the other is where you store all data and Rockbox.
WiiMC, a homebrew media center for the Wii, also returns an error every time I want to connect the iPod. And my Tv with media player recognizes two partitions, one is empty (Apple FW) and the other is where my data is.