To answer your question about downgrading, I did exactly this process yesterday, downgrading my iPod Touch 2G from the 3.0 GM firmware, down to 2.2.1.
First of all, you need to get hold of the 2.2.1 Firmware. There are links list on http://www.blogsdna.com/2264/iphone-firmware-221-and-ipod-touch-firmware-221-released.htm
If you download the zip file and there is a .zip filename suffix, simply remove the '.zip' portion from the filename. Do not unzip the file. The ipsw file uses zip to encapsulate the various files associated with a firmware upgrade.
Next, you need to connect your device to your Mac, and place it in DFU mode. This involves holding down the home and power buttons until the device powers off, and then lifting your finger off the power button, but keeping it on the home button for a few seconds, and then releasing. This is a little tricky, so have a look at the various articles written on the topic. It took me a couple of times to get it right.
Once you've put the device in DFU mode, you can use Xcode's Organizer window to load the 2.2.1 firmware onto the device. Go to the Software Versions menu, and select Other Version.... Then browse to your downloaded 2.2.1 firmware file, and click Open, and then click Restore [device].