You have to have a 3rd generation iPod Touch, but a friend of mine has one and it's not working.
One coworker updated his 3GS and it works fine, but the iPod Touch does not. on the 3GS there is no longer a menu option to customize the home button as it now functions solely to bring up the multitasking menu.
For the 3rd gen iPod Touch the home button options are just as before.