We have already seen James Whelton hacking the sixth generation iPod Nano. Now,Steven Troughton-Smith has discovered what may be DFU mode by holding down the restart buttons until you get a black screen and iTunes sees the device. Hit the video after the break!
Steven modified iRecovery to work with the iPod nano (had to add its DFU/Recovery USB ID) and allow it send files, and tested with some files he had extracted from the iPod nano 6G firmware using the extract2g tool. disk.fw and osos.fw work (one boots disk mode, the other boots to a homescreen). The other files make the nano boot to a white screen, but go nofurther. So, basically, it seems we can send encrypted firmware files to the iPod, and have them execute, similar to what is used to jailbreak the iPhone. If the nano rejects the file (i.e. unsigned, invalid), it reboots.
We will update you as and when more information on iPod Nano Touch pours in.