He is definitely not dead, and those people walking about are definitely not ghosts - it's just the feeling he gets watching them move. Re-read the book if you are unable to feel Toru's emptiness at the end of the novel. Toru's girlfriend's suicide might be related to Murakami's college experiences - he lost some friends during that time, and you can feel how pointless the world might feel to you if your friends just killed themselves like that.