I have a second generation ipod touch, still running the 2.21 version, when I connected it to the computer with itunes on, it tells me, there is a 4.2 version and asked me to update it, but when I do, it says there's an unknow error accurred (-1)...

I believe you will need to upgrade to iOS 3.1.3 prior to upgrading further. Instructions are below.

http://support.apple.com/kb/HT2052

I also have a 2nd generation iPod Touch and had the same issue. I purchased and downloaded the iOS 3.1.3 upgrade but got the same error message again before the upgrade was completed. I am stuck on 2.2.1. Any idea what the issue may be?

Are you sure you have a 2G iPod? See:

Identifying iPod models

A 2G can go to iOS 4.2.1 via iTunes directly if you have iTunes 10.X on your computer.

A 1G can go to 2.2 via iTunes amd 3.1.3 via the link proved already in this discussion.

Error 1 or -1

This may indicate a hardware issue with your device. Follow Troubleshooting security software issues, and restore your device on a different known-good computer. If the errors persist on another computer, the device may need service.

From:

http://support.apple.com/kb/TS3694#error1