The first thing that every iPod owner needs to know is how to restart your little MP3 player. Apple has a nice little tech note about restarting your iPod, and here's the gist of it:
Toggle the Hold switch on and off. (Slide it to Hold, then turn it off again.)
Press and hold the Menu and Select buttons until the Apple logo appears, about 6 to 10 seconds. You may need to repeat this step.
This is for the Click Wheel series of iPods only (that is, the iPod mini, iPod Photo, iPod (Click Wheel), iPod nano and iPod Video/5G).
Older iPods are reset with a slightly different approach:
Toggle the Hold switch on and off. (Slide it to Hold, then turn it off again.)
Press and hold the Play/Pause and Menu buttons until the Apple/iPod logo appears, about 6 to 10 seconds. You may need to repeat this step.
Here's my best guess as to what's happening with your iPod nano: you have inadvertently engaged the "hold" switch and so it's ignoring your attempts to put it to sleep!
Oh! Apple has one more tip: "If the above steps did not work, try connecting iPod to a power adapter and plug the power adapter into an electrical outlet, or connect iPod to your computer. Make sure the computer is turned on and isn't set to go to sleep."
http://www.askdavetaylor.com/apple_ipod_nano_wont_turn_off_help.html
OR
go here
http://docs.info.apple.com/article.html?artnum=61705