The new released firmware Version 2.0 offers so much good features that finally lured me enough to go ahead and give it a try, which is where the hassle started.
Apple offers the new firmware 2.0 for free for all iPhone users but charges $9.99 for iPod Touch owners which pissed off most of the owners including myself. I didn't have the intention to do so to get my Touch upgraded so I followed iPod Touch 2.0 Upgrade Download Link and downloaded the restore pack. Once I have the file ready, I fired up iTune, connected my Touch, held down the Shift key and clicked the Update button. So far so good, I got the window pop up asking me where the update pack located. I selected the file and the upgrade progress started, but it failed in the end with the error code "1603". I then ran through a couple of cycles that restored the iPod to 1.1.4 and tried to upgrade again, and still without any luck. I thought maybe Apple did something in their end that eventually prevented owners from upgrading without paying them. So I decided not to waste any time and went and paid the $10 to Apple, wished I can have this installed. And not surprisingly, it still came no luck. I felt I was stupid and wasted my $10.
It turned out I was stupid. There are solutions to this error code, one suggesting recharging the device directly by the charger for 10+ hours, and other suggesting reinstall iTune. But I took the solution suggesting giving a try on another computer. So I tried on my another computer that never had iTune installed. And yes, everything runs perfectly. I finally got my iPod Touch up running in version 2.0.
I am still in the process of resnyc but so far so good. I guess I had to pay Apple something because simply I didn't pay for my Touch.
And for any iPod Touch owners who want to give a try on version 2.0, you can simply download the package either from the link above or better, here. You don't have to pay to get it.