The PowerMate doesn't control the iTunes volume slider!
In the PowerMate Control Panel, there are presets included for several applications, including iTunes. When customizing an application in the PowerMate Control Panel, if you select Increase/Decrease Volume, the PowerMate will always adjust the System Volume only.
Most applications, including iTunes, use specific keyboard commands to adjust the volume. Double check the application to make sure you are using the correct keyboard commands and the application should respond accordingly.