How much money per month do you have to throw at either investment or the principle payoff? When do plan to either sell the house or otherwise access its equity? As asked above, is there a fee associated with early PMI removal?
When you pay down the principle on your mortgage to eliminate PMI, you do get the immediate return of eliminating the $40 expense every month. However, that extra money is then trapped in your mortgage at a 2.75% rate until either the end of the mortgage or until you sell the house or until you take a loan against your equity. The short term return (over the next year) of eliminating that $40 expense is relatively high, but as the years go by the overall return on the extra money you put into the principle payments falls sharply as it can only return the guaranteed 2.75% rate.
If you have a long time frame for your mortgage (over 5 years), then investing probably makes the most sense.