#1 I have a 2nd gen and it is a great little unit but I would not be looking to buy one at the moment as sadly it is becoming somewhat dated and nearing the end of its life span for the following reasons.
- Hardware wise it is soon to be 2 generations old and outdated with a 4th gen release expected in September.
- As Apple and App developers start to focus on the capabilities and features of new models you can expect the 2nd gen to be excluded from future firmware and App updates and releases and pretty much obsolete within the next 12 months.
- Depending on when it was purchased it could be almost 2 years old and may be getting a little tired with shorter battery life and a greater risk of failure especially from high usage\wear components like the home button and earphone jack.
If it was clean and in good working condition and going for a song then it may be worth picking up as a "beater" for going to the gym etc. but if you want to use it as a full featured device you would be better off hanging on to your money till September for 2 reasons A)to see what the new models have to offer B) because by then used 2nd gen and even 3rd gen touch models will selling real cheap as people upgrade to new models.
#2 The 2nd and 3rd gen look identical but if it has a rounded back, volume buttons on the left side and an in built speaker it is at least a 2nd gen.