Hmm. I'll try to answer your questions there.

1. Most of the people prefer to jailbreak their ipods to allow them install various type of applications that are unavailable in the normal apple app stores.

2. Once you jailbreak you can always search for the apps at Google. Some of the games/apps can be downloaded from iTunes for free although I've not try it.

Here is a useful website to read about.
http://www.ipodtouchfans.com/

3. First, from which I know is that you can install apps once you install the sources. There are plenty of sources from other people to be added into your Installer ( You'll get this once you jailbreak.). The sources contains all the apps that the person adds or his favorites. I'm not sure but I think apps can also be install via OpenSSH.( Its kinda like an FTP )

4.Actually, the apps can transform your ipod to a media portable device to an emulator ( play SNES or GBA games), and sure a pda too. That's when the wi-fi comes in handy.

Kindly read the first page for the details concerning jailbreaking steps and adding the apps.

Just my humble answer.

Well, about question 3. All the apps are from the Installer app. Here's  a quick points.

1.Jailbreak your ipod

2.You will get an application name Installer ( Its a blue icon with some lines). Shouldn't be hard to miss it since your new ipod have a few apps on the screen.

3. Enter installer and it will automatically update. ( You must have a wireless internet connection though)

4. You will see sources, and probably some are already there.

5. Click the install button and you will find several packages. Choose any which interest you.

So, here's a screenshot I managed to find if you're still blur.

Sorry bro, can't help you with that as I'm using the 1st Gen and I bought it at the states. I think there are other authorized distributors too. You are in Kuching? Hmm

http://www.macclick.com/index.php?main_pag...sort=20a&page=3

Here a site but I think the price is quite similar with the one you mention.