How to restore the device with simply ipsw file and iTunes

I have the solution for you here.

1. Plug the iPod into iTunes
2. Hold the power and home button together until the screen goes black
3. Let go of the power button, keeping home pressed
4. after 10 seconds let go.
5. open iTunes and click restore iPod.

you have a blank iPod, and will need to sync again

Update (from original poster)

These steps are correct, I had to actually go to the Genius Bar to find that out because the instructions on Apples own site are not correct. Specifically they do not recommend the two-button shutdown, but rather a regular shutdown which does not work.

More details here: http://codesweattears.blogspot.com/2011/12/putting-your-ipod-touch-into-recovery.html

Thats a tough one, the only solution I can think of is to have two separate users accounts on the machine you run iTunes on. Each account has its own iTunes file system and this includes the cache of applications, even though both user accounts may use the same iTunes account.

It's a bit of a hack, and not very elegant but here goes...

You would make a backup of your existing iTunes directory from within your profile and place it in a readable location for the other user account.

Log into the new user account, start up iTunes so it initialises your new folder structure for iTunes under that account. Shut down iTunes and copy your existing backed up iTunes account data over the new.

Barring file permissions changes, you should now have two users accounts on your machine that you can control the upgrade path for your applications on.