Retire,
Obviously its your decision but if I were in your shoes I would be conulting with more than your surgeon (who is going to recommend surgery) and an oncologist (most of whom recommend surgery). There are several other possibilities of treatment that pose far fewer threats of long term side effects such as radiation, brachytherapy, HDR brachytherapy, IMRT, proton radiation, HIFU, CyberKnife and so forth that you would be an excellent candidate for.
Most of the posts on this and other forums are from men who chose surgery and it is certainly an option that has worked well for many, many men but at the same time almost a third of men who have RP come back later for salvage radiation. And while most men who have RP recover long term continence it can take a year or so for everything to settle out and get back to normal, although many men gain continence much earlier. There will most likely be some form of ED even if you are able to achieve erections "sufficient for penetration." You will no longer have the ability to ejaculate, and your effective penis size is reduced by as much as an inch when the surgeon reconnects the urethra from the bladder to the base of the penis. The dark side of surgery is well documented in the heartbreaking stories of men who suffer severe incontinence issues, sexual dysfunction, a follow on need for pumps, implants, artificial sphincters, and so forth.
Of course there are potential side effects with radiation too, but they are usually less severe and shorter in duration. And the long term survival rate for men who choose some form of radiation is pretty much the same as men who elect surgery.
In my case, I was fortunate enough to have statistics that gave me many options that suggested similar efficacy. Given that, I chose a course of treatment that minimized side effects while providing a long term cure. While its still early (I finished my treatments a month ago) I have had zero side effects and my treatments did not interfere with my normal work and travel schedule.
Like others who responded to this thread, I would guess that your bouncing PSA is most likely caused by a temporary inflammation, having sex too soon before the biopsy, or just a quirky laboratory reading.
Regarding AS versus doing something: You're never going to have less cancer than you do now and you're probably never going to be in a situation where your cancer treatment options are as many and varied as they are now.
Before you lock yourself into something, I think it would be prudent to seriously and methodically investigate other treatments. With your statistics, your are most likely a poster child candidate for all of them. You don't want to wake up next October after having undergone surgery and wonder if you did the right thing because its too late at that point.
Best of luck to you.