Can a 2nd Generation iPod Touch be upgraded past 2.2.1? I've got an iPod Touch 2nd Gen.  It has Software Version 2.2.1.  When I click 'Check for Update' in iTunes it says it's already running the latest version.

Is iTunes right?  I thought I could update to iOS 4 (I only want to upgrade so I can get Bluetooth on the thing so I can use it in the car).
Yes, it can. My 2nd gen touch is running 4.2.1 just fine and dandy. (It appears that, like the iPhone 3G, they won't get 4.3, though.)

I'd recommend to download the 4.2.1 update from Apple directly and option-restore the update to your device.