Obviously I wasn’t the only one having this issue. But after a little research I’ve found a thread with some answers and two solutions.

The apparent cause is with mp3s “…encoded to 56 kb mono @ 44.1 kHz sampling rate…”. Converting these to AAC will supposedly solve the problem. But since it then knocks the files out of your podcast section in iTunes, it’s not really valid. This also explains why my AAC podcasts didn’t seem to have a problem.

Solution 1 - Roll back to 1.1.1.
I don’t know if I like this solution because, since Apple has had all their iPod updater download links redirect to the latest, you’ll have to go to a third party site to download the downloader (the link can be found in the thread about half way down). I’m not keen on getting things like this from other sites.

Solution 2 - Set the EQ to spoken word.
This seems to be a solid solution for folks. I haven’t tried this yet - listening to The Distillers at the moment. But it appears to work. Since most of what I listen to is podcasts I guess this’ll work fine. But Apple really should address this issue.

I guess that kinda blows my conspiracy theory that Apple was trying to nudge us into buying the new generation of Nanos. Or does it?