Easy answer: apply to both. Usually, you won't even have to figure out the answer to that question, the "market" will decide for you.

Just like YC, having been selected at TC50 or DEMO opens doors. Remember that VCs, corporate M&A people, etc. are swamped with requests from every possible geek who thinks they have an idea. They need to apply some kind of filter.

Depends on who your target audience is. As of last year, DEMO had the most traditional press walking the floor (NYT, Businessweek, etc). That gets you customer penetration outside of the Valley echo-chamber. If your audience is just early adopters, TC might be the way to go.

Both are good, have their strengths.

I went to TC50 last year. Only drawback I saw was that there were so many companies, many got lost in the crowd.