(...)And the music I downloaded to the thumb drive worked as well. I'm guessing the iPod Nano is the wrong format.(...)
Have said this many times over: the CTX1300 expects whatever is plugged into the USB port to (1) act like a mass storage device and (2) be formatted as FAT32.
None of the current Apple iPod models present themselves as a mass storage device when connected to USB (though some of them can be switched to that mode after they boot and, IIRC, the very early models could be configured via iTunes to always do that automatically).
If you pass that hurdle, the iPod's drive (be that an actual HDD like in the big ones or flash like in the Nano) must still be formatted as FAT32 for the CTX1300 to read the music files off it. The vast majority of people using an Apple computer with their iPods have them formatted as HFS+ so this is another blocker.
Finally, the CTX1300's music player only understands some music formats. While that list is very generous (compared to the rest of the market), it does not include known-broken things such as .WMA or .AAC that were recorded with DRM.