How can i update my ipod touch 2nd generation 8 gb to higher software?

A 2nd gen iPod Touch supports up to iOS 4.2.1

Connect the iPod to your computer's iTunes and copy any purchases off it to your computer via File > Transfer Purchases (File > Devices > Transfer Purchases on iTunes 11). You may also want to copy photosand any important documents off the iPod as well e.g. via the file sharingsection at the bottom of the device's apps tab when connected to iTunes, via wifi, email, dropbox etc - they should be included in the backup, but it's best to havea copy of them outside of the backup just in case. You can then force a backup of the iPod by right-clicking the iPod 'Device' on the left-hand side of iTunes and selecting 'Backup'.

Then start the update by selecting the iPod on the left-hand side of iTunes (on iTunes 11 you can enable the left-hand sidebar via option-command-S on a Mac, control-S on a PC), and on the Summary tab on the right-hand side clicking the Check For Updates button