I'd bet V8 is a definite improvement over Tracemonkey. It really feels like V8 already improves the DOM manipulation/property getters/setters for DOM. Mozilla doesn't plan to do that until past 3.1!
It probably feels faster because WebKit is really good about DOM manipulation. A lot of people don't seem to realize that the lion's share of time for a lot of JS stuff is in manipulating the DOM and re-rendering the page.
Coupling an advanced javascript compiler/vm with a really quick rendering engine leaves you with what you feel there.
Hard numbers, V8 is maybe 3x faster than WebKit nightlies on every benchmark suite I could find.
Put yourself in their shoes and attempt to come up with one good reason why they wouldn't want to keep making a browser. They rarely get out of markets they're already in, and I don't think they're just going to forfeit a dominant market position just because the competition is better (see Windows).
If they do their classic strategy, it'll be "embrace and extend" with Javascript. The only problem is that their marketshare has eroded to the point where this might just cause their marketshare to erode even more.
IE as an application is definitely here to stay, but I wouldn't consider it too off the wall for them to switch to one of the OSS HTML / JS engines. I don't expect it, but it wouldn't surprise me.
* Tracemonkey (Mozilla) * Squirrelfish (Apple/Webkit) * V8 (Google)
I would love to see a benchmark comparison (Sunspider?) to see how V8 compares to Tracemonkey and Squirrelfish.