Due to everyone asking on how to do this and not looking in their owner's manual, I created this video. Once you have the album, or all songs on the drive you want select, do these steps.

Should also work for a USB drive since an iPod is essential a usb drive.

http://youtu.be/7AaGcBo-rWI

 

 

Easier method:

Press Sel/Enter button.
Highlight Artists (don't press enter button)
Press Menu button
All songs are shuffled (also works if you highlight Songs or Albums; highlighting Playlists will only shuffle all the songs that are in playlists)

To shuffle a specific artist/album/playlist (artist example)
Press Sel/Enter
Highlight Artists, press Enter
Highlight Artist you want to shuffle (don't press enter)
Press Menu button
All that artist's songs are shuffled.