The redsn0w 0.9.6 b4 could be used to jailbreak iPod Touch 2G / 3G / 4G on iOS 4.2.1. If you want to jailbreak iPod Touch 2G / 3G / 4G on iOS 4.2.1, then here are the steps to do it using redsn0w 0.9.6 beta 4. But remember, for the iPod Touch 2G MC Model, 3G and 4G, this is a tethered jailbreak. If you want to SSH into your device, you need to put your device on a jailbroken state on every reboot.
1. Download iOS 4.2.1 for iPod Touch 2G / 3G / 4G from here.
2. Update your iPod Touch 2G / 3G/ 4G to iOS 4.2.1 using iTunes.
3. Download Redsn0w 0.9.6 b4 from here.
Now follow the rest of the steps given here to jailbreak iPod Touch 2G / 3G / 4G on iOS 4.2.1.