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The only time to upgrade kit for me is when what you already have limits you in some way.
I.E. the 350D has a fairly slow frame per second rate, so can struggle with some fast moving subjects. And in terms of pixels, it won`t allow such close cropping whilst maintaining detail as higher resolution cameras.
I`ve owned a 350D for about four years, I`ve only recently stopped using it as a backup/second body since I`ve now got a 7D thus relegating my 40D to a second body.
It really does depend on what you`re trying to achieve, but a 350D is still a very capable camera.
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