A 2G can go to IOS 4.2.1
Connect the iPod to your computer and update via iTunes
A 1G iPod can go to iOS 2.2 via iTunes and iOS 3.1.3 via
A 2G to 4.2.1. Requires iTunes version 10.X. If a Mac it requires OSX 10.5.8 or later. With 1OSX 10.4.11 you can only go to iTunes 9.X which gets you as high as iOS 4.1 if you updated to 4.1 before 4.2.w was released. If you did not then you are stuck with where you are currently.
What computer OS and versio do yo have?
Wha version of iTunes do yo have?