If you already own the PS4 version of this game, you can just purchase an digital upgrade on the PS store instead.
The PS5 upgrade improves upon an already amazing game. The higher resolution graphics and frame rate is immediately noticeable. Japanese voices now properly sync with lip movement during cutscenes.
As for Iki Island, there are enough changes to the environment to keep things fresh. It is also recommended that you finish the main story before starting the DLC. However, the gameplay remains largely the same, with only subtle differences, which isn't necessarily a bad thing.
Overall, a solid package with something for both newcomers and returning players.