yes, if you want to keep your phone jailboken, do not update.
iTunes will not ever update your phone automatically. all it does is CHECK for updates automatically, and if it detects an update is available it will ask you if you want to update. you can decline for as long as you like. Alternatively, you can set iTunes to check for updates manually. to do this (in windows) go to Edit -> preferences. In the "general" tab, uncheck "check for updates automatically".
Yeah it was just released yesterday so hopefully within a week we'll have a jailbroken 1.1.3 which would be great. I don't think it will take much longer than a week but it's always hard to tell with things like that.