Q: i bought a used ipod touch and need to update the ios...how do i do that

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.

http://support.apple.com/kb/HT4972

Also read the instructions from the section entitled "Update your device using iTunes" at the link below.

http://support.apple.com/kb/HT4623

Information regarding transferring purchases from your iDevice to iTunes on your syncing computer can be found at the link below.

http://support.apple.com/kb/ht1848

To update

The Settings>General>Software Update comes with iOS 5 and later.

Connect the iPod to your computer and update via iTunes as far as your iPod model allows

iOS: How to update your iPhone, iPad, or iPod touch

A 1G iPod can go to iOS 2.2 via iTunes and iOS 3.1.3 via

Purchasing iOS 3.1 Software Update for iPod touch (1st generation)       

https://buy.itunes.apple.com/WebObjects/MZFinance.woa/wa/touchLegacyLandingPage

- A 2G to 4.2.1. Requires iTunes version 10 or higher. If a Mac it requires OSX 10.5.8 or later.

- A 3G to 5.1.1  Requires iTunes version 10.5 or later

- A 4G to 6.1.5  Requires iTunes version 10.7 or later. For a Mac, that requires a Mac with OSX 10.6.8 or later

Identifying iPod models

I suspect you have the 1G and it is already maxed out.