You're right, those LW shared songs aren't in the iTunes library That's just a playlist so you won't be able to add to your iPod from there. Try adding files to the iTunes library from your LW saved folder...go to LW's library, highlight a file & click Explore. That should take you to your saved folder. There's more info below.
Transferring music to iPod & iTunes

I'm not sure why you're getting that error though Maybe try the iTunes help site, or their forum, unless somebody else here knows.
Apple - Support - iTunes