Is there a free way to wirelessly stream content to an iPod Touch (if it helps, 4th gen with latest 4.3.5 installed) without jailbreaking? If not, will iOS 5 enable me to do this?
Isn't this exactly what Home Sharing does? On your iPod, go to Settings > Music and enter your Apple ID and password under Home Sharing. Launch iTunes on your Mac or PC (and enable Home Sharing there too). Back on your iPod, go to Music and tap the More button, and you'll see an entry for Home Sharing. Tap that and you can play any of the music stored on your Mac/PC on your iPod.
There are a lot of options for this. The easiest ones use a native iPhone application that will cost you a small amount (usually around $2.99 on the app store). But you asked for a free solution so I'll start with that:
Jackson Chung over at Makeuseof.com has written a detailed explanation of how to stream your iTunes music library to your iPhone/iPod/iPad for free. It wont be the greatest experience so I'm going to include a couple of the paid options below as well.
These two options use a iOS application to enable the streaming:
StreamToMe — $2.99 on the App Store
AirPhones — $2.99 on the App Store
Finally, this option does not require an application installed on your machine as it runs a small server that is accessible via an iOS-friendly web interface on your device.
Remote Buddy — €19.99 on their website