I'm faced with the same decision, but I think the bike will sit around, maybe eventually get fixed up. My Gary Fisher MTB has a frozen seatpost (the bolt on the seat adjustment is probably frozen too, I recall supergluing it in place once!), the pedals are shot, chain is stretched (and snapped once on a trail), gears are worn (chainrings and cassette), and the RD shifter is not downshifting too well. I think the head bearings are loose, and the bottom bracket may be loosening up. One of the shifter cables is cracked pretty badly. Not too bad, for a 12 year old bike that spent its first 2 years outside all the time (in Maine), and has had one tuneup in maybe 1,500 miles (did get a chain/cassette replaced at the 1k mark).

But I don't think I could ever give it up or part it out--it was my commuter in college. Fond memories. Maybe I'll start shopping for parts on the cheap, and fix it up. But I think for now, I'll dig around for a lighter bike to get back into the hobby with. So, it'll sit in the shed.