Ugh, I love them both too much to decide. I'm a sucker for rainbows, so I think Ho-Oh's multicoloured design is just awesome, while Lugia's sleek, dragon-like appearance also appeals to me. Lugia's typing and movepool are intriguing, but I prefer Ho-Oh's more offensively-orientated stat distribution.
If I had to choose, though, I'd pick Ho-Oh, since it's the one I'd most likely use based on its stats.