You need to authorize your computer because that iPod is already registered to your friend on his computer. I would suggest backing up all of the data (you will need the user/password), reset the iPod, install the desired software/firmware, and install all of the backed up data onto the iPod. It would probably be better if you do this on his computer, as that will be where he syncs, downloads content, and backs up on.
Otherwise:
Do you use the same kind of computer as your friend (Eg: Mac vs PC)?
Have you tried using different versions of iTunes?
Have you tried downloading the FW manually?
