Sales of Goods act. Retailer is responsible to ensure that the item works for a reasonable amount of time and is fit for purpose. You should reasonably expect 3-4 years out of an iPod. Send a letter to HMV head office asking them to rectify the fault. At worst you might need to get an engineers report (maybe from Apple) to verify it has failed due to a manufacturing fault. You'll have to pay for this, but HMV will (legally) have to refund you that cost as well as repair/replace the iPod.
You will need an engineers report, and pay to get it fixed, if its deemed that the product was unsuitable then he'll be able to claim the money back, you have to take into consdieration that ipods get knocked about a bit, in pockets, coats etc...so it could have worked loose that way. I very much doubt HMV would end up paying for it
Just claiming the Sales of goods act is the worst thing you can do as most of the time it will get you nowhere Im afraid