I have an iPod 3 gen 32g, how do I update it since it says that it`s already updated all the way?

I have update 4.2.1 supposedly. This is my first iPod so I have no idea what else I can do to update. I really want to update it because I can`t download hardly any apps because it`s either incompatible with my iPod or the software is updated enough. Which ***** because I don`t want to feel like I wasted my money buying it. ;c

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