If it charges one way but not the other, my first guess would be a bad cable. Have you tested the USB cable you're using? Try plugging that USB cable into another device to see if it works.
If not, buy yourself a new USB cable. If the cable proves to be good, I'd still hang on to the iPod and charge it via the Firewire cable unless you just really want one of the new ones. They're very cool, but expensive.
You might also try going through this troubleshooting guide from Apple. apple.com/support/ipod/five_rs/ipod5gen.
Hm, good question. So, because you still have Firewire, you can still charge it and get files back and forth. So it still works.
However, the newer ipods are pretty spiffy, too, and I'm sure your older model has some battery life issues at present. I'd say save up to get yourself a new one, but you should be able to use the one you've got until you can afford it.
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