No, you can sell your iTouch 2G and purchuse a newer iTouch
2G means Second Generation. So it is a Second Generation iTouch.
Now there is the iTouch 4th generation with a camera and more improved things!
But what?
No there is not. As of now if you would like an iTouch that looks like a second generation iTouch you should get a second generation iTouch.
i have an itouch jailbroken with 3.0 i didn't install 3.1.2, but i don't think it will do something to it.
no
Update: the new iTouch (3rd gen iPod Touch) does have a camera Plus it can take screenshots of a game you are playing
yes
Yes you can
mmm no
No, there is only a camera on the iPhone, there is not one on the iPod touch yet.