Let us assume you have already designated correct playlists on your iPod, using the itunes software.
On your ipod, you go to settings>Shuffle>songs.
Once that is done, come back to the main screen,select music>playlist and choose a playlist you want. It will shuffle within that playlist. Quite simple.
In the menu option... go for Shuffle and Shuffle the songs based on Album
You can use this after you have grouped your songs by playlist as Sam suggested.
I keep 30 gigs of songs and I group them by playlist and shuffle albums.. it does nt jump from Rock to Carnatic .. its worked for me.. may be it would work for you!!!