I would just sell it, you're not gonna get arrested for it if it's just your personal ipod. If you were selling ten then maybe it would be dodgy but for one, no way.
Ring up your loal cop-shop and ask them, they'll tell you at the worst it "could" be a civil case.
If you really want to you can restore to factory settings here;
http://docs.info.apple.com/article.html?artnum=60983
Originally posted by Derfel CadarnYour sale must be worded correctly
Would selling an iPod that's full of songs be legal?
“Item for sale ipod comes with free songs”
It’s just like selling tickets to an event. You are buying a package and getting 2 free tickets
Unless ebay states in its terms somewhere an ipod may not be sold you can't but getting around the songs on it issues is what I was answering to