Printer or service? The answer relies on a combination of your comfort level with digital photo manipulation and color management, the amount of time you have to spare (or are willing to spend on printing), your level of patience/need for instant gratification and the target audience/location for the prints.
I've owned an Epson 1280 for over two years and although I love it and have gotten many wonderful prints from it, the time and effort spent in doing so is not usually worth it (for me) if all they're doing is going into a photo album or being sent to relatives.
I recently set up a Canon i860 for my parents and was able to print out fantastic looking photos (on epson semigloss paper) and even at the medium level quality (I think it was 720dpi), they looked fantastic and only a very critical eye would see anything wrong. Although I love my Epson 1280, I do remember struggling to find the right "magic combination" of settings to make the colors print right in the beginning. I have also set up Epson 820s and 890s in the past for family members and have had no end of problems getting them to work (multiple printers, multiple machines, multiple ink cartridges, multiple times... they just all come out with funky color casting, in one case it was cyan, another case it was orange, etc - that's why I finally gave up and made them go to Canon). I did get the 820 working after two hours of struggling and test prints, and then my sister moved houses and bought a new laptop, and after several more hours of troubleshooting I was unable to get it to print in anything other than cyan.
Ofoto, shutterfly, snapfish and the other such services are so tremendously easy to use and affordable, assuming you have the bandwidth to upload large JPGs. If you aren't already skilled in photoshop, they provide very nice services to sharpen, saturate, B&W, crop, etc. Also, I find that the glossy photo paper Epson provides doesn't look nearly as good as their semigloss, but they don't sell the semigloss in 4x6 or 5x7, so I end up trimming 2-3 prints on an 8.5x11 sheet down to size which just makes it more of a hassle and I frequently have sheets of 8.5x11 waiting to be cut lying around. My family's used to glossy shots from 35mm, so they don't care.
One downside I've found from ofoto is that if your photos look at all professional, they will refuse to fill the order (every single time) and require you to fax in a consent form that swears you own the copyright (and I'm told that this form wouldn't stand up in court were I actually breaking a copyright). That wouldn't bug me so much for my occasional order of holiday cards or whatnot, but it happens every time my family orders prints I upload as well - separately for each person. I have not found a way to sign a form that promises that I own the copyright of everything I upload. I believe their definition of professional is "decent lighting with a solid color backdrop", so watch out if do crazy things like use a bounce flash and drape a sheet over the couch. :-) Whereas with snapfish, I uploaded a shot from a pro studio (which did give me the rights to reproduce along with the JPG) and they printed out cards with no complaint.
After my experiences with Epson and Canon, whenever I decide it's worth it to upgrade my printer (or whenever I get tired of buying a single ink cartridge for all colors), I will definitely be going Canon. My requirements are support for large format (13x19) and individual ink tanks; thus, I have my eye on the Canon i9900.