I've got a few domains that I think are pretty valuable, and I can't decide whether I should develop or sell them. Does developing a site really improve its value, even if that site is not generating much traffic?

i have found the market very tough right now in regards to selling as
everybody is looking for a bargain,i would definitely hold for now.

Values of a domain will rise if developed and making a stable income. Just having some traffic wont help increase value unless it is highly targetted and in a lucrative field.