I wouldn't call unchecking one preference a "total nightmare".
This happened to me in 2003 when I switched from Linux to Mac. I still get a little worked up over that, even though nowadays I just let iTunes manage everything and throw away the original files after I rip something.
Also, try plugging your USB hard disk into a different USB port in a different order from your iPod. Now it comes up with a different drive letter and iTunes can't find any of your music.