2 interesting ideas on why Microsoft keeps updating windows phone
Microsoft's continuing commitment to Windows 10 Mobile means...
A third possibility - they are keeping win10m alive, for a "second entry device catergory" rather than a replacement device. A surface pro, to their existing surface laptop. That their intention is to keep win10m alive, whilst designing a sibling device, with a sibling OS, that they hope will also boost sales and development for the existing win10m platform, along with the boost that windows s, and windows on arm tablets should offer the UWP platform.
Simply - that despite everyone's assumption to the contrary, they actually aren't done yet.
Look at a historical example - apple. Mac almost tanked. They had to change the chipset, and strip back expenses to keep to company afloat. They even got help from gates, to prevent bankruptcy. Then they came out with the ipod. And then the iPhone - but they never abandoned mac, and now their MacBook is a hot selling notebook, and mac sales are doing okay again.
You don't nessasarily need the device that is failing, to succeed, in order to return it to profitability. You simply need the company brand, and the ecosystem to succeed, and then the device falls into place.
If a new mobile device were successful, and windows on arm also boosts UWP, and is successful, by proxy win10m will be more successful - as the company branding, and the ecosystem would both be boosted.
I don't think win10m is going anywhere. I think they intend to keep it on long term. Hence why they are developing cshell for it. Much like apple held on to mac, only for it to be revived by their successes in phones and mp3 players.