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Cydia works only the first time i open it on my ipod touch 1 gen on iOS 3.1.2 and i cant update it. So i was wondering if i could update cydia manually somehow but i dont know how.

You can, by using dpkg via ssh to install the Cydia DEB manually.
Here are the DEBS: http://apt.saurik.com/debs/

Not sure which version of Cydia runs on 3.x, don't pick the newest.