1) Theoretically it would be possible if you added an untrusted source; in practice, as long as you stick to the default sources in Cydia you should be fine.
2) A restore will fix any problems you encounter. In the absolute worst case, you might have to do a DFU restore.
3) It is not illegal. It will technically void your warranty, but if you do a restore and
set up as a new device, it removes all traces of jailbreaking from your system, so nobody will be able to tell.
4) Depends on how badly you want themes. Personally I don't care much for them, but I find apps like SBSettings and iFile to be completely worth jailbreaking. Do you really want to take a hit in battery life and (possibly be stuck with a tethered jailbreak, depending on your model) just so you can have wallpaper and cool icons? I don't ask this to be snarky; it's the actual question you have to answer for yourself.
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5) This could be completely a moot point in your case since you already upgraded to 3.1.3.
When people say "you cant do it now or w/e but yea",
THIS IS IMPORTANT. THERE IS A REASON THEY ARE SAYING THIS, AND IT IS NOT JUST TO BE MEAN. They're explaining patiently that you will possibly not be able to jailbreak for the forseeable future, and trying to do it could quite easily just end up with you having to restore your iPod.
It is POSSIBLE that you would still be able to jailbreak on 3.1.3, but to be quite honest with you, if you don't already know exactly which model Touch you have, it does not bode well for your jailbreaking efforts. "the one w/ the speakers.. so i think 2nd gen..?" is not specific enough.
When did you get your iPod? What capacity is it? What is the model number? What kind of earbuds did it come with? Does it support VoiceOver? These are all clues that will tell you which model your Touch is. IF you DO have a 2nd gen Touch, then you MAY be able to use a (new version of) redsn0w to jailbreak. If you have an 8 GB model, then things get even more complicated.
Don't even try blackra1n.
I don't say this to be mean, but to explain that the more you know about every aspect of this process, the less likely you are to encounter problems.