The 2.0 upgrade will allow connection and use of 802.11x.
I had some problems initially connecting to my campus Wifi which utilizes 802.11x. It would see the wireless signal, but when i tried to connect, it would be perpetually "logging in", and ultimately couldn't. I tried restoring my iTouch to see if that would change anything and when i went to campus the next day... it connected no problems (and no you dont have to pay for the 2.0 upgrade again).
Also, i have heard that if you turn push OFF temporarily, it will connect. Why i dont know, but i also tried that with a friend's and it worked... go figure. Hope this helps.