Before installing 1.1.2 you must first update iTunes to ver. 7.5
First connect the iPod Touch to the computer; then:
I installed 1.1.2 twice, once by downloading the upgrade, then holding down the Shift key while clicking the button in iTunes to 'Check for Update'; this causes the windows explorer directory list popup to appear; then just navigate to the directory where you saved the 1.1.2 download; select the download file then OK.
The other way I installed the 1.1.2 was to open iTunes, go to the iPod screens, then click Restore. This caused iTunes to go to Apple, get the latest version 1.1.2 update and automatically install it.
i hope this helps