So to recap
The files classified as 'podcast' are not detectable in a search from the main library and do not appear in the 'tree' under 'Podcast'. When the iPod is connected and selected through 'Drives and Devices' typing in 'podcast' in the search field, a drop-down will appear (podcast subtype) and the 540 affected files are shown when selected. Selecting All and changing the subtype to Music seemed to have no embedding effect. But perhaps I am doing it improperly. I can't seem to do the change in the device menu.
Resync and eject the iPod, still have 540 podcast files listed on the iPod. I then thought perhaps what I should be doing is sync from a blank slate. Closed MC, opened iTunes to restore the unit. Then thought I'd see what iTunes had to say. Checked the iPod. iTunes indicated the same numbers. While in there I thought to try to change the designation. Made the changes noting the music library numbers went up by 540 but for some reason, it was still reporting 540 in the podcast section while no files remained on the list. Eject the iPod, check the numbers again on the unattached unit, and the same, music files up, Podcast still showed 540. Reconnect, open iTunes and hit restore.
Open MC and reconnect the restored iPod, make sure all the files in the main library are on 'music' and sync. Finishes syncing, open devices and view the 'on device' ipod, the and I'm back to either blank or podcast. Eject the iPod and check it's contents: the 540 are missing from the music total but under podcast.
I've just gone through the procedure again in iTunes changing the 540 back to music. The songs are back up but I still read 540 in Podcast. I will then close iTunes and open MC.
Opening MC and reconnecting the iPod, selecting Devices > iPod and it brings in all the music files from C:\, D:\ and the iPod content. Highlight the iPod content and I have the proper number of songs BUT the Media Subtype is now blank.
I'm thinking I'd like to make a clean slate of it. Clear the iTunes and MC Libraries. Reimport the master folder