I have not bothered to purchase the january update on the ipod touch.. tho recently I updated from itunes and it updated the look of the touch's dock to that of the jan update and the iphone. I didnt get any other apps tho... (obviously because I havnt paid for the 1.1.3 update)

My question is... since the 2.0 update suposedly this month is free... will I have to pay and update to 1.1.3 first? or do you think 2.0 will just download and work?

i don't think it will be free!

so you are still on 1.1.2? Updating to 1.1.3 is free so you can update all of the current ipod touch's to the new software to 1.1.3 and above for free (except 2.0 which will be $9.99 for us touch users) but if you jailbreak it, you can get all of the January apps via installer
go to ipodtouchfans.com and read about it.

2.0 will not be free, it will be $9.95. If you did not pay the $20 for the January Update to 1.1.3/1.1.4, then you will only have to pay $9.95 for the 2.0 update.