Q: how can i update my ipod 2.0 to latest version

To know if your iPod can support iOS5, plug it into your computer with which it is synchronized.  Then, iTunes, click on your iPod on the left side bar and then, click on the "check for update" button.

It sounds like you have a 1G iPod Touch, which can only go as high as iOS 3.1.3.  See here for purchasing the 3.1 update.

Purchasing iOS 3.1 Software Update for iPod touch (1st generation)

B-rock