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Is it safe to do it and how do I?

If you mean the actual OS Updates, yes it is safe, and it is possible. It is actually very easy too. I, however, like to leave them in case I ever need to revert to them. If you still want to proceed, they are in
Macintosh HD>Users>YourNameHere>Library>iTunes>iPod Software Updates.
Since 2.0.2 is the latest, do not delete the file iPod1,1_2.0.2_5C1_Restore.ipsw, or you will have to re-download it to restore your iPod.

These instructions are for Leopard.
 
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