You go to the main iTunes library, click and hold the mouse button on the song or songs you want, then drag them to the iPod icon on the left.
Click the eject symbol next to the iPod icon when you want to unplug it. If you decide you don't want a song or album on the iPod, just click the iPod icon, select the song or album and press "Delete".
It does work that way. In fact, if, like me you want to use the iPod on more than one computer, and don't have enough space to have the same iTunes library on both, I think it's the only way you can get it working.
Alternatively, I also use a program called "Anapod Explorer" from
http://www.redchairsoftware.com that enables you to manage the iPod directly from explorer. Costs about £15 though. The only thing Anapod explorer cannot transfer is songs from the iTunes store. You need to use iTunes for these.