Most certainly the 635.
While 535 has more RAM, a bigger screen and an FFC, those touch screen issues are a deal breaker.
I bought it upon launch, then played with it more recently when Microsoft stores started carrying them and a simple multi touch test still reveals how screwy the screen is. While the SD200 can't use wireless display, I've found that it's performance isn't that much lower than the SD400. If the screen weren't chaotic all the time, I'd be able to credit it for handling games like NOVA 3, Modern Combat 4, Order & Chaos, Mass Effect and others very well.
It's quite embarrassing that the company who owns Skype would release the 635 without an FFC... but what it does, it does very well.
When I care less about gaming and more about battery life, the 635 is usually on my person.