I suspect you have a 2G iPod. those can only go to iOS 4.2.1.
An 8 or 16 GB iPod without cameras is a 2G iPod.
The iPod touch (3rd generation) can be distinguished from iPod touch (2nd generation) by looking at the back of the device. In the text below the engraving, look for the model number. iPod touch (2nd generation) is model A1288, and iPod touch (3rd generation) is model A1318.