I believe the Olympics should go ahead as planned.
China is an enormous country with a population of 1,319,175,334 at time of writing.
China population clock
The earthquake is of course an enormous disaster. Let's suppose that 13 million people are involved or helping in some way. That's less than 1% of the country's population. In the grand scheme of things, the Olympics is a relatively smaller event. Cancelling or postponing the Olympics two months ahead would not free up relief workers and would bring no practical benefit to the victims of the earthquake. Instead, it would simply be a waste of all the efforts the Chinese people have put in already and an economic disaster. Furthermore, an Olympics to be proud of will be a morale booster, something the country needs right now. There is a real opportunity here to make the Olympics "count" towards earthquake relief by linking sponsor profits to donations. It must also be acknowledged that one of the main reasons why the Chinese government is being so open to the media around this disaster is the upcoming Olympics. If anything, this will be to China's benefit. Certainly the openness is generating a great deal of empathy with the Chinese people. From personal experience I can testify to their amazing work ethic and sense of the common good. It's difficult to imagine the grief of these parents who have lost their only children.
One thing that amazes me is the way that poorly constructed buildings, notably schools, have toppled like ninepins, while others have remained largely intact. Media attention and international involvement may help to raise the bar for China's building codes and standards in the future.