theres a complicated process to rollback from the 3.1 softwares because it came out to solely stop Jailbreaking. Apple specifically designed it to NOT rollback.
-Download Firmware 3.0 (for your device)
-Go to C:\Documents and Settings\Application Data\Apple Computer\iTunes\iPod Software Updates (files are hidden, so you need to view hidden files)
-Back up files in the directory
-Delete all files
-Paste your 3.0 firmware into the software updates folder
-Rename it to the exact name of the 3.1.1 firmware (iPod1,1
3.1.1_7C145Restore.ipsw)
-Put ipod in DFU mode
DFU MODE- press the power and home buttons for 5 seconds, (ipod powers off) release power button but hold home button for 20-30 seconds, until your computer beeps.
- In itunes, it will detect an ipod in recovery mode.
-Shift click restore and use your renamed firmware and update.
For a 2nd gen, its the same routine, just make sure you have the correct image file for your unit.
Theres how its done, a little complicated, if you get lost ill try and walk you through it.