Blackmailed into buying 3.1.3 update!?

I have an iPod Touch with OS 2.2.1, and I've been perfectly happy going along without updating to OS version 3... until I updated iTunes to version 9. iTunes 9 went and downloaded updates for my apps and replaced the versions that I had in iTunes before. After it did this, the next time I synced my iPod iTunes deleted all the apps that were not OS 3 compliant, including ones I had purchased.
I don't want to be forced to buy OS v3... I just want my apps back. Is there any way to restore those apps to the previous versions and put them back on my iPod?

So I have to buy the update if I want those apps back.
Follow-up question. Will my 1st Gen iPod Touch struggle to run the new OS? I've had problems with other types of hardware whose manufacturers pushed out an update, only to have the hardware unable to run the new software and also be unable to revert to the previous version.

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