that's bullshit you have to pay for the second warranty, they should offer you a full refund if you don't want to pay. But every companys warranty sucks, applecare sucks, vehicle warrantys are a rip off. 
OP, seriously, you steped on your ipod, just be happy they can even repair it. Iphones arn't that great either, edge is spotty as fuck, the maps function only works half the time, you can't fit a regualr headphone jack into it, you can't play videos back to back, the AVout cable is $50, the screen only flips for typing in safari, there's no flash in safari, you can't download images/video/music/anything to it wirelessly. But this thread isn't about why my iphone is only half as cool as it could be.