Reading briefly on what "ego" really is (I am an uneducated fool, if no one has noticed that yet) I'm a little mortified: loss of ego through drug use would be terrible! It'd be a complete disassociation with reality, probably launching you soundly into the realm of lunatics and psycho killers! Who'd ever want that?
Hang on to your ego, indeed.
On the other hand, maybe LSD-users weren't that clever, and the jargon discussed here didn't deal with the Freudian ego but just the generic catch-all "self-confidence" and "big-headedness" meaning of ego. Maybe tripping humbles you, gives you more perspective, and maybe that's what the song is about.
Funny then that Frank Black who, in the opening of Pixies-documentary loudQUIETloud says, "Well it's my goddamn band, right?" half-joking, half-looking at the camera as if he's going to regret saying that later, is singing this song about holding on to your ego. I like to point fingers, so I will: Frank Black's giant ego killed the Pixies. Literally, it came out of his head and broke up the band. It was crazy. You should have been there.
It's OK. Frank Black has never had a hit single on par with Kim Deal's The Breeder's "Last Splash" so, in the end, the joke is on Frank Black. They're both so fucked up in the head (as evidenced in loudQUIETloud) that neither one of them can win that competition.
It's a shame, had the Pixies managed to stay together and rape the rotting corpse of their artistic merit, you know, like Weezer, they could probably be at least as big as Weezer, if not even bigger.