it sets an ipod as read-only when a write test fails or if specific files are missing.
I vaguely recall it might happen as well if you arent an administrator on your PC - you need to run the at least once as an admin, but it should show an error message indictaing you need to run MB as an administrator, so not likely to be the reason.
However, I can understand for recent iPod 5th generation and i was planning to do an update to add support for 5Gs, but i dont see why an older 3G would cause problems.