I myself was having the issue on the main menu page when I selected the MUSIC folder. It would restart everytime. My first workaround was to turn the MUSIC folder off, and turn on the submenus (Artists, Albums, etc..). But this was a work around, not a fix.
From the discussion boards, the issue is related to podcasts. If you have sync podcasts and then delete the podcast, it still keeps the name of the podcast as sort of a virtual folder. You must go into iTunes with your Nano attached, and delete those folders as well. Voila, the Nano is fixed.
I sure hope Apple fixes this in the next Ipod Nano update or at the very least, make the workaround solution with podcasts easy to find on their solution website.