You can freely update the ipod 2G to the 3.0 Just make sure you have the latest version of itunes 8.2.
Download one of these:
http://www.google.com/search?source=...w&aq=f&oq=&aqi=
Hold the shift down and click restore in itunes, then select the file you downloaded.
Then download redsn0w v0.8 and run it. Point to the file you downloaded above and follow the directions. I haven't really found much in jailbreaking that's worth it on the ipod. There is a great app to cache the map data so if you are out and about you can still use the map app if it's cached those tiles.