Should I wait now for the SP5 or get the $1299 sp4 i5 256, 8gb?
When it comes to technology, you can always wait and things will get cheaper and better. What you should really ask is if you really want or need a better Windows tablet right now AND is there something significantly better just around the corner worth waiting for. Concerning the former, the SP3 was pretty good and offers pretty much the same functionality as the SP4: you'll have to decide whether the damage on your unit bothers you enough to warrant getting a very similar device at a substantial cost. About the latter, we haven't heard anything about an SP5 yet, but, if I had to guess, Microsoft is waiting for Intel's 10 nm chips which have been delayed into some time late next year. These 10 nm chips are the only way that Microsoft will have a significantly better product from either a much faster CPU, significantly better battery life, or some combo of the two. My guess is new Surface Pro end of next year, so can you wait a year?
Edit:
If you are a true gamer, I think Suface Pro 4 can be a great upgrade considering how even more powerful its Intel Iris 540 graphics card really is, especially in handling latest-gen games. But if you're not a hardcore gamer, I would say it's best to stick with your SP3 at this time because it's still a beast in the beauty.
Really? "True gamer"? Firstly, the SP4 Core i5 has the HD 520 GPU which is pretty bad, equivalent to an Xbox 360 that came out in 2005. Even the Iris 540 in the Core i7 is roughly equivalent to having a low end mobile graphics card... which is still bad. If someone really wanted to play games on the go and wanted something portable, the Razer Blade is possibly the best pick featuring a Core i7-6700HQ and a full GTX 1060 6 GB that is roughly 8x faster than the Iris 540 and costs $1,800 USD which was the same price as the SP4 Core i7 but it looks like there's a sale going on (it's $1,600 on the Microsoft Store). The main downsides are that it doesn't have a touch screen and is 4 lbs as opposed to about 2 lbs. There's a 4K touch screen version but it's $2,100 and you won't be playing games at 4K using a GTX 1060 anyway.