I'm pretty sure, but it's a purely subjective observation since I didn't time anything. What I notice is that web pages seem to load faster, and I able able to pan around web pages better before the page has completed loading. I'm pretty sure that loading time of ebooks in Books.app has decreased. I also installed Apache for offline document viewing, and am pretty sure that stuff loads faster there too. I wouln't call it night and day though, because the Touch was a pretty quick little unit in 1.1.1 anyway IMO.
It's not a super huge deal, I wouldn't have upgraded if it seemed extremely unreliable, or would have take a long time. I have a MacBook, so just followed the exact instructions and didn't have to try a PPC 'beta' or anything like that.
The update will erase your 3rd party and iPhone apps, but just about everything else is preserved- data from those apps, your music and movies, even all your emails are still there. You just need to re-install your old apps in Installer, and basically you have your old Touch back except updated to 1.1.2.
EDIT- There's a repository you can add in Installer.app that has the 1.1.2 iPhone apps. Once you do that, re-enabling the iPhone apps is easy too (the 1.1.1 versions don't work.)