Welcome to the forums britkev.
What format is your video in right now (from the Ipod Touch) and what format do you want as the finished product?
It would help us if you would download and install a program called MediaInfo and examine the file with it. I find the Tree view within MediaInfo to be the most informative. This will show us the codecs used for both the audio and video and the current resolution. Just copy and paste the information from MediaInfo into this thread.
http://mediainfo.sourceforge.net/en MediaInfo is free, you don’t have to contribute anything to get the download to work.
Adjusting the orientation of the video is possible through the use of filters, but I don’t know if Movie Maker can do this. I know that AviDemux can do it for most formats.