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
Use StreamToMe on your iPhone, iPod Touch or iPad to play video, music and photo files streamed over WiFi or 3G from your Mac or Windows PC. No prior conversion or syncing required (huge number of formats supported without conversion) just tap the file and it plays.
AirPhones — $2.99 on the App Store
AirPhones sends the audio from your computer to your iPhone or iPad with virtually No Latency. Perfect for wireless, synched audio.
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
The most powerful remote control solution for the Mac®. Control more than 100 applications, virtual keyboard and mouse, presentations, media center software and important system settings right from your iPhone™, iPod® Touch, your Apple® Remote or one of the many other remote controls supported by Remote Buddy!