I know Vegas has a template for the iPod, but it's the iPod's old resolution (320x240). Not the now supported (since September 2006) 640x480. When I try and change the resolution and bitrate to match I get a file that iTunes will play but won't sync to the iPod. If I attempt to use the "convert to ipod" feature in iTunes I get a file with just sound.

How do I use Vegas 7 to convert to an iPod at higher resolution like 640x360? I don't want to be stuck with my optimized for iPod videos at only 320x240.

Vegas also has a template for 640x480. Just look in the same dropdown as you see the 320.

All it shows is Default and Apple iPod Video.

Which build of Vegas 7 are you using? I don't have anything older than 7d within arms reach, and too lazy to run to another floor to check older machines. 7d has two iPod templates.