Returned iPod Touch, 2.0 Upgrade?

Ok, so I contacted an Apple Expert and he said this was an iTunes specific question so here I am.
Problem: Bought an iPod Touch 2 days ago, bought the 2.0 upgrade for it, and today it's showing dead pixels! I'm about to go return it to Walmart and purchase a new one from the Apple Store instead.
Question: I already purchased the 2.0 software for it but the iPod is crapping out so when I get a new one from the Apple Store am I out my $10 for the broken iPod Touch upgrade and have to repurchase the 2.0 upgrade again?

You don't have to. Just plug it in and click on Restore so that iTunes can update with the new software that you downloaded. Just plug it into the computer that you download the software from and also sign in to your iTunes Store account in iTunes and make sure that you authorise the computer to play your purchase contents.

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