need to reset email address and password on updates

Are you referring to updates that are available through the App store? When apps are downloaded they are basically attached to the Apple ID (email address) that was used to purchase/download them. This is the Apple ID that is required in order to update those individual apps. Signing out of and back into the App store won't reset the Apple ID that the apps are looking for.

Instead I would recommend performing an "erase all content and settings" reset on the iPod in order to take it to a factory fresh state, allowing you to install your own apps without the need to worry about multiple Apple IDs and whatnot.

You should be able to perform the restore from the device itself by going into Settings > General > Reset and choosing "Erase all content and settings". This will wipe all of the previous owner's data from the iPod Touch, giving you a clean slate.

Hopefully that makes sense for you.