In other words, is the following \"cursoring\" approach guaranteed to work:
Identities will will always follow the increment that defines the identity:
IDENTITY [(seed ,increment)] http://msdn.microsoft.com/en-us/library/aa933196(SQL.80).aspx
which can be positive or negative (you can have it increment forward or backwards). If you set your identity to increment forward, your identity values will always be larger than the previous, but you may miss some, if you rollback an INSERT.
Yes, if you set your identity increment to a positive value your loop logic will work.