I was reading up on the update and it seems that most changes are for either iPad2 or iPhone 4 (e.g. the personal hotspot).
Is there anything in this update for the iPhone 3GS? Any performance improvements? Any reason to install it?
I just updated to 4.3.1 yesterday and so far I'm not impressed. My phone is jailbroken though so I already have tethering with MyWi (side note, MyWi On Demand is totally worth the $25 if you have a jailbroken iPod or non-3G iPad). The multi-tasking gestures are pretty cool once you go through the hassle of re-enabling them.
The home sharing is pretty cool, but requires iTunes to be open. You can use the free Audiogalaxy app to do the same thing without iTunes being open on 4.2 and other iOS versions.
Safari does seem to be a little quicker and the phone itself doesn't seem any slower, so unless you care about an unlock or jailbreak (it is now jailbroken but still annoying to reinstall all your Cydia apps after upgrading), I don't really see any compelling reason to upgrade or stay on 4.2 unless you need one of the new features and can't find an acceptable work-around or third-party solution.
If you like messing with your phone, do it but you're not missing out on anything spectacular not in 4.2.1.