I got the 1G custom firmware from my friend to JB my 1G 3.1.1. When I shift+restore in itunes and select the FW, it says that my touch isn't compatible. My touch is running 3.1.1, and I upgraded directly for 2.2.1 to 3.1.1. I used itunes 9.

you have to be on 3.0 to jailbreak to 3.1.1 i think

Why would it make a difference?

its totally different firmware . just do it, and it'll work. upgrade to 3.0, jailbreak with redsnow, then make sure your ipod is in RECOVERY mode, not DFU and restore with custom 3.1.1