Both the iPod touch 2G (MC model) and iPod touch 3G requires a new exploit which is currently not available. So if you haven’t already jailbroken your iPod touch 2G with Redsn0w, you can do so with sn0wbreeze 1.6.1 for 4.0.
The instructions for jailbreaking as usual are exactly similar to the instructions we posted earlier for iPhone 3GS and 3G. Simply download iOS 4 for iPod touch 2G, and then follow the complete step by step instructions posted here which will guide you on how to create custom firmware files. Once you have created a custom firmware file, you can simply restore to it via iTunes 9.2.
Feel free to ask me any question here should you run into any problem during the jailbreak process.