iphone 3g stuck on ios 2.1

Bought this phone for holidays abroad, cannot connect to itunes or app store from phone, plugged into laptop with latest itunes but won't upgrade to ios 4 with error code -1?????
Can sort of browse the net with safari but won't let me log in to anything (just lets me browse) then freezes on web pages, sim with three, calls texts fine.
Can i jailbreak it and if so what are the benefits?
If jailbroken could i update it or access app store or itunes?
Thanks in advance ;-)