iPod Touch (2nd gen) OS question

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I have an iPod Touch 2nd generation, model MB531LL, Version 2.2.1 (5H11a). in fact this is my wife's iPod but she doesn't use it, so I use it now. Still, I have it synced with her computer for now. I have not made any software updates, yet, and when I looked at the App store (from my computer), I did not see any OS update available. I guess I have to hook up the iPod Touch and then maybe iTunes takes me to the OS 3.0 or so?

I would like to enable copy/paste, and maybe run some Apps that requires iPhone OS 3.0. I have no use for Bluetooth at this time.

So the question is: which OS should I install? 2.0 (is that when copy/paste was introduced?). 3.0? 3.x? what is the most stable OS for iPod Touch?

Thanks