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I'm sure it's because you are using HDMI, the DRM isn't allowing it.
Have you tried it through the Composite or Component inputs?
My old 5th gen iPod uses a cable to hook to the Composite inputs, the picture is pretty blah though. Component should give a decent picture though, I don't know enough about iPad to know if that's an option.
Since I started using Roku to stream I haven't used the Pod anymore for video.
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