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Vasudev over at meraTechPort was having some issues with his Zune 4 not showing the proper battery level indication, so he found the answer and posted a little guide on how to recalibrate your Zune Battery icon. He found his answer here: KB article ID927710.

To properly cycle the battery, follow these steps:

- Update your Zune with the latest Zune device firmware available. At present the latest version is Version 2.3 (1145). For this, from the Zune software installed on your comp. click > Settings > Software > General > Check for updates. Connect your Zune with USB Sync cable, open the Zune software while the Zune device is still connected to your computer, the Zune software searches the Internet for the latest version of the firmware. If a newer version of the Zune firmware is available, a message to update your device appears. You can also manually check for new device updates by clicking Settings > device > Device Update.
NOTE: Do not move or disconnect the Zune device until the update is complete. The update may take several minutes. During this time, the Zune device may restart several times.

- Now we will come to the calibration part. With the battery at a half-full charge or less, connect the Zune device to a power source and fully charge it until you get the green battery icon. ( ) . Now disconnect it from power source.

- Go to the default screen > settings > display > backlight > and select ‘always on’. Now from the display option only select brightness > and set it to ‘high’.

- Come back to default screen by holding back button. Select music, shuffle all.

- Keep your Zune aside. Once the Zune device turns off; which will take some time, press the play\pause button to check whether your Zune turns again or not. If the Zune turns back on, wait until it turns off again, and then press the play/pause button. Repeat this step until the Zune device no longer turns on.

- When the Zune no longer turns on, connect it to a power source and Change the display settings back to your preferred choices, defaults are backlight >15sec. and brightness > medium

- Fully charge the device until the battery icon appears green ( ).

So in this way you can recalibrate your battery. After recalibrating, my Zune battery icon accurately represent the battery charge available.

Thanks