Hi,
as the computer recognizes the iPod, give it a try and copy some large files/folders to the iPod. This is just a test to see, if the hard drive is ok and you can store these files or not, after that you can delete the copied files from the iPod.
By the way, you bought the iPod as "damaged", right?! If yes, everybody can do a simple restore, even the person you bought the iPod from. So i think there is more to do than just a simple restore.
I think that the logic board, the hard drive and/or the hard drive cable is damaged. As the iPod says its corrupt during restore i would guess that it's the hard drive. It could be also the hard drive cable but if that's the error, it should appear earlier.