I side with HiPS. Other people have stated my reasons, but I will agree that this is a fairly ambiguous case, as it really depends on how you think HiPS works (which I feel is pretty simple, but I've seen enough arguements about it to know that it isn't). That being said, I think it might be time to analyze this problem from a balance perspective.
HiPS uses the hiding mechanic. Generally speaking, it is easy for a character to have hide bonuses that are really darn high. There's armor enchantments that add to it, wondrous items to raise Dex, spells, etc, that all add up pretty quickly. Hide is countered by a spot check, which is actually fairly hard to raise. There are few magic items (eagle eyes, robe of eyes) that aid spot, and they aren't seen often. There are no spells that add to spot that I know of (and none that outright trump it), and it's a cross class skill for most classes. Hide is, however, trumped outright by blindsense and tremorsense. These abilities are easy to come by in creatures, but are not granted by any core spells or items. The bottom line: it can be easy for mosters to find someone that's good at hiding, but it's practically impossible for PCs to do so. This is something that I came to realize quickly when I played 15th level Assassin that relied heavily on HiPS.
TS is a (mostly) 6th level spell with a pretty short duration and a material component cost of 250 gp. It can be used starting at 9th level as a cleric, 11th for a wizard (HiPS is available ot level 8 for a Shadowmaster, 13 for an assassin, and 17 for a ranger). It would become very heavy on resources to use it often, even though HiPS can be used unlimited times a day. There are items that can grant this spell at will, but they cost a lot (75000 for a gem of seeing, 80000 for a crytal ball).
Considering this information, I think that balance dictates that TS should trump HiPS. Without it, I don't think that any PC (or humanoid NPC) would be at all safe from someone with HiPS (my afformentioned Assassin could probably have killed most other PCs in the party, or a highly guarded king, with little effort) . Using TS to stop someone with HiPS is still a fairly expensive countermeasure, and will not be seen often enough for HiPS to have it's usefullness lessened.
Just my 2 cents. I don't even agree with it from a rules standpoint, but from a balance perspective it seems kinda one sided.