The idea that upgraded products are released based on market pressure applied by competing products is reasonably valid. But it certainly isn't the only reason.
However I think most posters on this thread have overlooked the obvious. The competition for the 1DsII is not from Nikon but from Canon's own 5D. Yes, I understand the differences between the 1DsII and the 5D and don't want to go there.
As a bit of a technology geek, I was quite surprised by the general consensus on this site by seasoned photographers suggesting that the 5D produced slightly better images than the 1DsII. Proving once again that you can't judge a product by its spec sheet alone.
If this favourable comparison of the 5D over the 1DsII holds up to further scrutiny, then Canon will likely feel the market pressure to upgrade the1DsII as quickly as possible. From a branding perspective it's not a good thing to have your flagship product usurped by one of your own, much less expensive products.
This also translates in to lost sales for the 1DsII. I was thinking of purchasing Canon's flagship, and more importantly, most expensive DSLR when two things happened. First the 1DIII was released with a larger LCD panel and more friendly user interface. And two, the 5D now has sufficient distribution to provide real world comparisons with the 1DsII.
Given the significant price difference between the two cameras I've settled on the 5D. Budget permitting I can purchase a new 1DsIII when it's released and have the 5D as a full frame backup that's also much lighter to carry around. The emphasis here is on the 'budget permitting' part.
Add all of this together and you can see where sales of the 1DsII are likely to slow down. This is evidenced by its recent drop in price. The assumption being that the drop in price is an attempt by Canon to stimulate lagging sales.
In summary, I think Canon will release the 1DsIII once it's ready. They may wait for production to ramp-up before they announce it as I'm sure they'll want to be able to ship it quickly. They may also be waiting for current inventory levels to drop a little further.
Just my two cents.
~iGuy