Apple has published a bugfix release for iTunes for Windows (v. 4.1.1) which is apparently aimed at folks who experienced the freezing bug in Windows 2000, such as Patrick Nielson Hayden. No word yet on whether it addresses the “Nomad not working” bug.
Update: From the readme:
What’s new in iTunes 4.1.1
iTunes 4.1.1 includes improved performance when using your iPod, addresses an incompatibility with Windows 2000 and older third-party CD burning software, and improves support for non-standard mp3 files. Also, the “Keep iTunes Music folder organized” preference is now turned off by default.