Having just had a PS1 loco, a Premier Blue Comet, converted to PS3, I say go for it. It will still run in conventional mode if you upgrade, but you have the added flexibility of command operation. If you're worried about collector value, hang onto the PS1 gear that will be removed for the upgrade so you can put it back to stock if you want to. I don't know for sure, but it seems to me putting it back to stock could be done.
I'm a prewar collector/operator at heart and will always keep my prewar trains original, but I never gave it a thought that the conversion to PS3 might devalue my Premier Blue Comet. To me, a modern train like your Hudson or my Blue Comet should have more value after a PS3 conversion. Look on eBay at what PS1 locos are selling for compared to those with PS2 or PS3.