To fix or not to fix?

I currently have an iPhone 3gs. I recently, however, got my hands on an iPhone 4, in damaged condition. I was told it would cost $199 to fix, likely water damage(I have a $50 gift card I could use), but doing this I would have no contract. Is it worth it or should I buy a new or refurbished phone or wait for
the next model? What would YOU do?

Wait for the next model. If your iPhone 3Gs is in working condition, no sense sinking money into something when an even newer model is on the horizon.

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Either get an iPhone 4 (new or refurb is your choice) or wait for the iPhone 5 which looks like it will be Sept at this point.