Absolutely NOT!! Do not upgrade if u intend on keeping the jailbreak. There's an untethered jailbreak for 4.3 on it's way. Besides, I'd hold off till all your jailbreak Apps are also upgraded for 4.3 compatibility. This could take a couple of months till there is a stable untethered release and for all the jailbreak apps to update. So be patient; it's gonna take a while. Hold Off.

You can upgrade it to 4.3.1 and get untethered jailbreak, but as of this moment, iTunes will provide you with 4.3.2, for older firmwares go to http://www.felixbruns.de/iPod/firmware/ and download an older firmware. And I would like someone to correct me if posting this website requires permission or not.

just letting you know, but felixbruns (although we all use it) is illegal and should not be talked about or discussed.

often their updates do nothing except make people not be able to jailbreak anymore. i currently own 2 ipods that are both running 3.1.3 because nothing 4+ gave me anything that i couldn't get off of cydia. if you are not experiencing any problems, do not update

Please note that if you jailbreak any iOS devices (iPhone, iPod Touch, iPad), the warranty will be null and void. Apple will refuse to repair any iOS device that has been jailbroken. Additionally, do this at your own risk, as jailbreaking will expose you to malware, which targets jailbroken devices. If something does go wrong during the jailbreaking process, Apple will refuse the repair it. Jailbreaking is considered tampering, and as such, the warranty will be void. Just keep these in mind if you want to attempt this risky procedure.

how i do it