I don't know why everyone acts like you have to choose one or the other. Playing covers gives you a chance to slip your originals in for an audience that's already paying attention and having a good time. Just have to make sure your originals are as good as the rest of the set.
+1
Writing/arranging originals is rewarding, but it's also fun putting your own spin on a song someone else recorded. Unless there are outside forces preventing you from playing one or the other, why not do both?