The option to update without the computer (Over the air) was made available with iOS 5. If your iDevice is using a version of iOS lower than 5, you will need to use iTunes on your syncing computer to perform the upgrade. Use the Apple link below as a guide for the upgrade.
Also read the instructions from the section entitled "Update your device using iTunes" at the link below.
Information regarding transferring purchases from your iDevice to iTunes on your syncing computer can be found at the link below.
Are you sure yo have a 3G iPod?. Some users who thought thay has a 3G iPod really had a 2G. A 2G can only go to 4.2.1
iPod touch (3rd generation)
iPod touch (3rd generation) features a 3.5-inch (diagonal) widescreen multi-touch display and 32 GB or 64 GB flash drive. You can browse the web with Safari and watch YouTube videos with Wi-Fi. You can also search, preview, and buy songs from the iTunes Wi-Fi Music Store on iPod touch.
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.