The space on an ipod is measured by GB (gigabytes) and MB (megabytes) if the GB and MB are all filled up, you can't fit anymore songs, games,or movies. The average movie takes up a little less than 2...
You can go into the Music application (it is orange and has a music note on it for iPod Touch!) Once you open it, you can look through songs, albums, artists, composers, genres, and even Genius...
Go to the iPod page in iTunes, then check the box that says "sync only check items" after this go to your library and uncheck the songs you don't want on your iPod, then just sync your iPod.
This is with windows xp but will probably work on windows 7 and mac. First click on your ipod icon and and the bottom of the screen, check manually manage music and videos. Then create a new playlist...