I just did... went from the 16GB 3G to the 32GB 3GS. It's pretty well documented what all the changes are. So it sort of boils down to $300 (for the 32GB) vs. upgrades... which one means more to you.
I will probably upgrade to each new model if ATT allows the upgrade price. So far it's been a no brainer... because the market allows us to sell our old phone for the same or more than what we pay for the new one. Another item I factor in is a "reset" on my warranty.
I'll say go for it. Among other improvements, the RAM in the 3gs is twice the size of what you have on 3g, so you'll definitely see the "S is for Speed" difference. And as already suggested, you can put the one your currently have up for sale on Ebay and make enough money to offset the cost of the 3gs.
If you know the features then everyone will give you a different opinion (most people here will say YES!) as will I since I did upgrade I even payed the in contract price of $499 for the 16GB 3GS. Worth it in my opinion since you can sell your 3G for 300+ on ebay (I sold for 350) so I payed about $100 with all ebay fees and AT&T fees.
So its more is it worth it to you, if your a big tech fan then yes I think its fun to have new tech toys and be able to do more with your phone, you can do stuff a lot more quickly with the 3GS and I have been using it as a computer a lot lately since I have an ankle injury and I cant always use my computer.
The 3GS really makes the jailbreak better in just about every way since it has more RAM and a higher CPU clock speed and a better GPU the jailbreak can really utilize the speed GREATLY! that is if you intend to jailbreak..
so its up to you.. is the features worth it? I said YES! and got it.. I would advise you yes since you can get it cheaper then I did and you can sell your 3G if you are so inclined..
It just depends on if you think the iPhone is a good enough phone to upgrade and if you don't mind selling your cellular life to AT&T for another 2 years.. I am fine with it since I like my iPhone and I like GSM and the capability of SIM cards.