Sorry to tell you this, but you are running up against Apple's Activation Lock, a security measure that was put in place to prevent stolen or lost iPods/iPhones/iPad from being activated by anyone other than the rightful owner. To get past Activation Lock, the original owner must remove the device from their account. You can't do it...otherwise, it wouldn't really work for its intended purpose.
You are going to have to ask the person who gave it to your daughter to contact the person he got it from and ask him to remove the iPod from his account. That's really the only solution.