With RedSn0w 0.7.2 iPod Touch 1g and 2g users can jailbreak 3.0 firmware on Windows. Before following this guide please restore your iPod Touch to 3.0 firmware. To get the 3.0 firmware you have to connect to iTunes, check for updates, and buy it for about $10. Yes Apple is screwing you. Positive side is that if you have both a 1g and a 2g you get to download firmware for both for $10.
You will need RedSn0w 0.7.2 which you can download right here along with the 3.0 firmware file for your device. Since you already bought and downloaded the firmware in order to upgrade to 3.0 you can find it one your computer
iPod2,1_3.0_7A341_Restore.ipsw is the iPod Touch 2g 3.0 firmware file.
iPod1,1_3.0_7A341_Restore.ipsw is the iPod Touch 1g 3.0 firmware file.
On XP they are located in
CDocuments and Settings\ YOUR USER NAME \Application Data\Apple Computer\iTunes\iPod Software Updates\
On Vista the are located in
CUsers\ YOUR USER NAME \AppData\Roaming\Apple Computer\iTunes\iPod Software Updates\
Lets begin. Extract redsn0w-win_0.7.2.zip to a location on your computer and run redsn0w.exe.
Find your firmware file, select it, and click Open.
RedSn0w will tell you that the ISPW has been successfully identified. Click Next.
You'll see a pop up as RedSn0w does some stuff.
Select to Install Cydia and click Next.
Now you should plug in your iPod Touch and turn it off. Once you are done click Next.
RedSn0w gives you instructions. We are entering DFU mode now. First hold the power button for 3 seconds.
Keep holding the power button and start holding the home button for 10 seconds.
Release the power button but continue holding the home button for 30 seconds.
RedSn0w does its thing. Let it.
Finally RedSn0w has finished loading everything onto your iPod Touch. You will see a pretty screen on your iPod as it is being jailbroken. Don't mess with your iPod while all this is going on. After your iPod restarts you are done!