I have been in this situation and I have done both with different children. It probably depends on the prep school. Prep was a poor choice for my shy sensitive child, not because of the small classes but because the school wasn't interested in children who were 'difficult', it was very much fur coat and no knickers as they say, lots of excellent customer service and treats for the children but not really offering anything over the state school, at least not at pre-prep level and nothing you couldn't get with a private tutor. My personal experience is that state schools seem to care more and have generally better GENUINE pastoral care based on the needs of the child not the needs of the school's bank balance but again it depends on your individual circumstances and the individual head teacher. State schools also have to sit SATs so you have more of an idea about how children are actually doing but not everyone is a fan of these but if they are being coached for SATS then it isn't much different from prepping for the 11+.
It still really annoys me that you have to give a terms notice and pay an additional terms fees at many schools even if the school is failing your child, it tells you their ethos, many are in it for the money not for your child's wellbeing despite this meaning you cannot transfer them to a more suitable school without quitting your job and home educating. I am sure this doesn't apply to all prep schools just some.
I think if you haven't tried both it is hard to compare!
On my experience I would choose state. I have known people go from state schools to Eton with no problems transitioning (they already came from wealthy families, the ability to fit in had nothing to do with the school they attended but the attitudes they inherited from their parents!).
Also it is true that your should choose the school where your child will have friends and be happy because otherwise they will fail in terms of their personal development.
A generally good teacher - student ratio is also helpful, which is not exclusive to private schools.
You are the most important factor in your child's education, by supporting it, championing them, filling in the gaps, providing extra curricular activities, the school makes only a very marginal difference.
The benefits of any school gets smaller if it involves things like long commutes or very early starts (depending of course on the individual child's sleep habits) which are not good for childrens' health or brain development.
So I say save the money, all the way through!