Jailbreaking A 1G IPod is rather simple. I'll explain how to do this in a few simple steps.
1) The first thing you need to do is to download and install the latest firmware from iTunes. All you need to do is open up iTunes and click on your connected IPod. Then simply click update.
2) The next step is to download Quickpwn 2.2.5. This will allow you to jailbreak the latest IPod firmware.
3) The next step is to download your current firmware. You can check what firmware you have through iTunes under IPod. IPod firmware can be downloaded from any website where its posted. I would post a link, but IPod firmware links expire constantly. Your best bet is to search Google for (your current firmware) 1G IPod Touch firmware. Make sure you download and save it to somewhere on your computer where you can find it easily.
4) Next open up and run Quickpwn. Follow all the onscreen steps to successfully jailbreak your IPod.
I've posted some screenshots of what it should look like.