Success! I don't know exactly what happened, but most of that lost space is recovered. I ran basically every freeware disk cleanup program I found, a 7-hr. disk defragmentation and it seems I've recovered all but 40 mb.

I'm guessing there was a temp file somewhere as some of you have suggested.

I also plugged in my iPod and transferred the same files again. Thanks to everyone who took the time to reply.