This episode was a great start to what will be the ultimate episode next week when the sacrifice takes place. The ending, once again, completely unexpected. Jenna was the last person I thought would get involved in the Klaus controversy. Yet, thats what makes the show amazing.
As far as Damon, theres no way the writers will kill him off. He is what Stefan isn't. Without him, the cast/show wouldn't be balanced. Stefan would no longer have someone tormenting him, and would have Elena to himself. My guess is that he'll either become a hybrid like Klaus or be saved my Elena's blood.
Matt and Katharine (unfortunetly) may be the ones killed off in the next episode. This season was titled "the year of the Kat", so maybe this is it for her.
Overall, the events leading up to nexts week episode have been amazing. But I'm really glad that the sacrifice isn't the actual finale. The fact that we have one more episode afterwards means we'll get a taste of the aftermath, instead of having to wait to September to see it.