Traditionally, Apple seems to wait until the customer grapevine begins predicting the death of the iPod Touch before releasing an update. (So I'll help get an update released by predicting its demise)
I think that the latest iPod Touch will be the last. But that said, it still has a bit of life left in its current generation.
One reason why it is difficult to predict is because we really don't know what the target market is for it. Yes, some will say that it is targeted for kids... I don't agree. The price is too high for a device to give to kids are too young for a cellphone. There are capable alternatives that are less expensive.
Without knowing who the target is, we can't really forecast where things will go.
In contrast, I know how the iPad Mini is used and can forecast with fairly good accuracy what's going to happen with that.