iPod Touch PC086LL: OS update??

I have OS version 4.2.1, but can't download paid-for apps because they require OS 4.3. Also, it said in iTunes that my device was already up to date... Am I going crazy, or is there going to be an update?

I don't know what generation of iPot touch I have. If I am unable to download my paid apps because my iPod is too old, I'm not going to be pleased.