COnnect to computer and update via iTunes,
iOS 4: Updating your device to iOS 5 or later
You need itunes 10.7 or later on the computer.
Your iPod is a 4G, right? That was the first on to have cameras.
Are you sure you really do not have a 2G iPod? Those can only go to 4.2.1
Identifying iPod models
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.