Just to reply to my own post from three months ago, whilst looking at totally unrelated things, I learned of an app on Cydia named ScreenSplitr which allows the AV cable to continuously output what is currently being displayed on the iPod touch (or iPhone) display.
It has a slight limitation in that it works by running in the background grabbing what is currently being displayed on the device's own display (roughly three times per second on my iTouch 2nd gen), then using that to send down the AV cable.
As such it isn't suited to watching videos or action games being played as you'll get a slideshow-like display, though at around three frames per second, it is fast enough to use for scrolling around a webpage for instance while looking at the TV. It's pretty neat having a large-screen representation of exactly what is being shown on the iTouch's screen (such as the icons when an app isn't open), and especially neat that it adjusts the video output to scale and display on the TV in portrait or landscape mode automatically. The app itself is very straightforwards; tap it and it turns video mirroring on (with an 'On' displayed next to it), tap it again and it is turned off. That's all there is to it (provided you have an AV cable plugged in).
I just thought I'd post this here as my AV cable has been pretty much unused for the video side since I bought it, until today. Why Apple don't allow this sort of functionality in apps on the AppStore is beyond me, as it would certainly make their £36

AV cable a lot more attractive to many people.