"What about if someone steals the ipod and then decides to take the music off and put it up on P2P networks? Am I going to be held responsible for the music being pirated when it wasn’t my fault?"

That is a legal issue - just because your information is in the song doesn't mean you pirated it. They still have to prove you uploaded it.

Its no different than if someone steals your car and uses it in a hit and run. The License/VIN is tied to you through government agencies - they still have to prove you were behind the wheel.