Yes. The iPod's circuitry will no longer charge the battery once it is determined to be full, even if the iPod is still attached to external power.

More information:
Actually, this can also be a more complicated issue. Lithium ion batteries age faster when stored at full charge. If your usage of the iPod consists almost exclusively of use while plugged in for extended periods of time such as weeks or months, and very limited usage from the battery, the battery is essentially always in a charged state. A fully charged lithium ion battery ages at a faster rate than a lithium ion battery at the optimum storage capacity of approximately 40%. However, keeping an iPod battery near this optimum storage capacity can prove difficult to manage. A lithium ion battery also ages from use, as well as from storage, so the aging effects of constant use of the battery in order to keep the charge closer to 40%, versus constant use while attached to external power, come close to being even.