Jailbreaking a Touch isn't as easy as it sounds. I tried and failed.
I'm just waiting for the developers to get their hands on the SDK and get free apps from them.
As for album artwork, make sure the file from iTunes has the artwork, and then add that one on the touch. Otherwise, if no artwork is found, a music not will appear (When unlocked) or your main wallpaper will show (if locked).
And as for a case, I highly recommend the Griffin "iClear". It's really nice! The only downside is trying to get the clear screen protector on without air bubbles/dust being caught underneath.
Enjoy your Touch!
EDIT: I followed the instructions on the link above and was successfully able to upgrade to a jailbroken 1.1.3 iPod. Thanks for the link!