Trade ins are rarely a good deal for the person doing the trading - the store always ends up on the good side of that equation. Either sell it on eBay (you'll get $150 or so) or hold on to it - there's actually some good games for the PSP now, so if you can afford to it's probably in your best interest to have both.
If you trade it in, you'll probably only get $75-100 in credit for it... that means you'd be eating $150-175. That's a pretty costly decision.
Definitely get a DS though - it's fantastic, and has tons of great games. And the games are cheap to boot; it's pretty easy to come up with $30 to drop on a game.
But I don't think you came to Planet Gamecube for an objective opinion on what to do with your PSP - that would be like going to a Yankees fan site and asking what you should do with this Red Sox shirt of yours. I think you know what kind of answer you'll get.