Jailbreaking your iPod is now legal, but Apple still doesn't authorize it. It will also void your warranty, so if you are out of warranty or if you don't care a bout your warranty, don't worry about that aspect of it. I jailbroke mine, and I LOVED it at first. Then after a while, apps started crashing randomly, and I noticed a performance decrease after awhile due to the applied themes and skins. Your iPod is also more vulnerable due to the fact that the root filesystem is unlocked, so beware. You also have to watch out which Themes you download, as some of them will cause Springboard to crash (your Homescreen UI, etc.). Those are most of the downsides. Now the upsides. You are able to customize your iPod further than you can out of the factory, and even customize hardware buttons. For example, you can make the volume buttons skip to the next song, pause, play, and go to the previous song. You can change the icons, change the status bar, change the lockscreen, change a lot of system text if you know what you are doing, and a lot more. There are a lot of upsides and downsides to jailbreaking your iPod, but you just have to find which side you are willing to focus on most. When I first jailbroke my iPod, I was just thinking about the unbelievable ways you could customize your iPod, but after awhile, I started, as stated above, noticing apps crashing randomly and a performance decrease, and it became such a nuisance to me that I un-jailbroke it. Again, it is what you want the most. I guess, as orksecurity stated below, it might depend on the programmers. I jailbroke mine with sn0wbreeze, and I have had no experience with other programs. It might be just the code is sn0wbreeze that is glitchy. I guess if you are willing to put up with your apps eventually randomly crashing and the performance decrease, you can go ahead and jailbreak. If you care about your warranty, your iPod's speed, and your iPod's reliability, then I wouldn't recommend jailbreaking your iPod. I hope that helped! Good luck and best wishes!
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Oh, and I forgot to mention, you can also change the sounds, such as your lock and unlock sounds. And to answer your question, it might harm it, depending on what you download onto your iPod.
I wouldn't. Apple writes perfectly good, stable code specifically designed to run on iPhones. There is no need to jailbreak it to do crazy effects and themes that will only slow it down anyway. Most people who jailbreak their iPhones/iPods have had various problems with them in the past, most commonly failing to boot.
Depends on whether the folks who wrote that jailbreak knew what they were doing, and on whether Apple writes code that won't function when the jailbreak is present.As with anything that voids your warranty, think long and hard before altering something in a way that you can't reliably alter back.