There is an option in iTunes to the effect of "Manage files manually". It should allow you to have your whole audio library in iTunes library, while copying to iPod only what you want. I don't use it at the moment, because all of my music (just) fits on 160GB Classic.

Regarding the "Now playing" list, have you tried disabling "USB disk interface" (it is called something else in iTunes, but you know what I mean)? Anyway, an AC power adapter (or a special USB cable with only power leads connected) should help - my Classic simply keeps playing while being connected or disconnected to the power (usually via dock, in my case).

Cheers!