This will give you the easiest way to jailbreak. However, I don’t like it much. It forced me to restore a couple times.
Anyway, first, update to 1.1.4. If you are jailbroken on 1.1.3, you must click “Download Only” at the prompt in iTunes. Then, shift-Restore to the file. Otherwise, it won’t work. If you have never jailbroken, you can just plain Update.
Now, download ZiPhone here. If you have a 16 GB Touch from before Macworld (Jan. 14), or a 32 GB Touch, you must use the Windows version or it won’t work.
OK. Now, plugin your Touch/iPhone and close iTunes, iPodService, AppleMobileDeviceService, and iTunesHelper from Task Manager. Then run ZiPhone. Click on the “Jailbreak Only” button. If you have a 16 GB Touch from before Macworld (Jan. 14), or a 32 GB Touch, then repeatedly click on the Jailbreak button. Otherwise, you only need to click once. The iPod/iPhone will reboot in Recovery Mode, then it will scroll lots of text. If you have a 16/32 GB Touch, then close ZiPhone once the MAC Address is displayed on the iPod. It will continue.
This is a really bad guide. I will improve it later.
ZiPhone also works on 1.1.3. I didn’t post it earlier because there was no working 16/32 GB solution.
3/13/08 4:00 Update: 9 minutes since I posted and I found out something. Apparently, Zibri (ZiPhone developer) got a 32 GB Touch, found out why there was an error before, and plans to release a new version soon.