I used Greenpois0n RC6 for my ipod touch 2g MC model... worked perfectly...
just download greenpoison, run it, then turn your ipod completely off (while plugged in), press start in greenpoison and follow their very simple instructions.
Once done it will reboot the ipod and you'll have a Loader app on your springboard, use that to install cydia
*if the loader crashes (automatically closes when you open it) its because you didnt use the right version of greenpoison. Get the correct one, restore, then redo the jailbreak with the newest version of Greenpois0n