If I jailbreak my ipod touch, would it give me the same capabilities (software choices) as an ipod touch with the software upgrade? In other words, can I save $20, jailbreak it, then download the software that would have come with the upgrade?
Yes, you can. If I remember correctly, I'm pretty sure that you can also download all of the extra stuff such as lyrics support, chapter support in video, etc. You'll get everything from the purchased 1.1.3 upgrade with a few more options.