I recently purchased an iPod Touch for myself for Christmas! As soon as I took it home, what was the first thing I had to do? Hack the crap out of it!! But there was only one problem, the iPod touch comes with the 1.1.2 Firmware which has not been jail broken yet as far as I know. One reason I am writing this tutorial is because of the lack of explaining other sites do. They say here it is, do it. In this tutorial, I will explain step-by-step how to downgrade your iPod and JailBreak it.
The first step is to make sure there is NOTHING on your iPod that you would like to save. Downgrading will erase your music.
Download and save the following file. This file is the 1.1.1 firmware for the iPod Touch/iPhone.
Open iTunes and click on your iPod so it brings up the screen to update or restore your iPod. While holding the shift key, click on update. This will bring up a file browser. Browse to where you saved your 1.1.1 Firmware and double click it. Let iTunes do its thing. It will extract and do other crap to your iPod. When it is finished, your iPod will restart and be blank.
With the 1.1.1 firmware now on the iPod, you are ready to JailBreak it. Click Safari and navigate to:
Read the instructions and click Install at the bottom of the page. This will install a .tiff file and also restart the iPod.
After restarting, there will be an Installer.app on the main screen. Click this and at the bottom, click install. There will be TONS of 3rd party apps for you to play with! A favorite of mine is the nes emulator.
If you have any questions, leave them here and I will do my best to answer them!