Jailbreak it.
I just did this a few days ago with my first generation iPod Touch, and it is by far the best thing I have ever done with it. It honestly is almost like having a completely different device. I can easily multitask between as many apps as I have the ram for, completely customize the looks of the OS, and get a crapload of other free apps. It is impossible do describe how much awesomer my iPod is now.
I decided to go for it as the first gen iPod Touches and iphones do not support iOS 4, and only the most recent ones support multitasking. I used this tool to do it:
http://spiritjb.com/
It was very easy, and took only a few minutes. My only complaint is that Cydia, the app store equivalent, is pretty slow, but there are other ones you can get.
Here are some screenshots.
I changed the battery icon to an android robot, that fills up based on the charge.
Custom background, reflective dock, battery percentage, and free ram shown. Also the weather icon shows the actual weather:
A pulldown from the bar at the top (I've since added a volume switch as well). This can be opened from any app:
Switching between open apps:
Here's what I've installed so far:
Activator- lets you control how to activate background tasks like multitasking
Android Battery- does what it says
Backgrounder- lets you run apps in the background
ProSwitcher- lets me switch the open apps Palm Pre style
Grooveshark- lets me listen to any song I can think of
Poof- lets me hide unwanted icons
Quake 3
ReflectiveDock
Safari Download Plugin- lets me download files through the web browser
SBsettings- the pulldown show above
WeatherIcon- puts live weather info in the icon
WinterBoard- the first thing I installed, lets me customize the UI
All in all, it is awesome.