Well from the research that I have done for you it would appear that 1G and 2G ipod touch models suffer from poor wifi range...
And although I have not found any posts on Youtube or Google for a 2G touch that tell you how to boost the wifi with this method, I think the person that
that device found a tut somewhere or took it upon himself to cut that hole in the case to gain access to the external wifi connector and would have had an external wifi antenna to connect to it to extend the wifi range...
Probably when trying to steal the neighbors wifi's
.