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To drag a music or video file into your iTunes library, left-click the file and hold, drag the file into your iTunes library and it will sync the file into your library.
The music files should still be in your "My Music" folder.
The iTunes software will link to the iPod but you do not need to purchase music from the iTunes store as you can add music from any source; such as your own CDs or music files already on your computer. Other retailers, such as Amazon, provide downloading software which allows any music you purchase from them to be automatically added to your iTunes music library.
Apple was eager to please the music industry, and design iTunes and iPod to prevent piracy of music, which is what you are asking instructions for. It is nearly impossible to do what you ask without a 3rd-party program of some sort. You could find CopyTRans by Googling for it, and load it on your iTunes computer. I haven't used it, but they say it works OK.
Copy the file/folder you have downloaded into 'My Music' (found within 'My Documents') Once the music has copied got to itunes and under file select 'Add folder to Library'. Find the folder you just added and select it. itunes will do the rest.