You could now jailbreak iPod Touch 2G (MC Model also) on iOS 4.1 using the newly released Sn0wbreeze 2.0/2.0.1. Sn0wbreeze 2.0 was released first and since some users faced the iTunes Error 37, iH8sn0w updated the Sn0wbreeze version to 2.0.1 to solve the issue. Here are the instructions to jailbreak iPod Touch 2G (MC Model Also) on iOS 4.1 using Sn0wbreeze 2.0.1.
NOTE: A major problem here is that you need to be on 3.1.2 if you have an MC Model iPod Touch 2G. If it is a Non MC model, then it should be jailbroken on any firmware once.
1. Download iOS 4.1 firmware for iPod Touch 2G from here.
2. Download Sn0wbreeze 2.0.1 from here.
3. The jailbreak guides for iPhone 3GS on iOS 4.1 and iPod Touch 2G on iOS 4.1 are similar. So follow the guide given here to jailbreak iPod Touch 2G ( MC Model Also ) on iOS 4.1. ( Exclude step 8 in that guide ).