As the Douglas Peucker algorithm works by iteratively removing those points that are within a given tolerance from some line between two other points in some given input unit, you can assume that if you have a geometry covering a large north-south distance, you will get greater amounts of simplification for a given tolerance in degrees as you move further south. I believe that this will scale with the secant approximately, as with the scale factor in a Mercator projection, as essentially if you use degrees in this way, the algorithm is behaving as though the input is projected as the distances used to calculate tolerance of a point from a line between two other points will be Euclidean.
So, yes, you would be better off using a projected coordinate system. I don't know much about the 3400 projection, but I have worked with the UK's 27700, which is also Transverse Mercator, and therefore has constant scale in the North-South direction, and increasing (but small) distortion either side of the central meridian of the projection would be ideal -- so ideal for ST_Simplify.
Something like:
SELECT ST_SimplifyPreserveTopology(ST_Transform(geom, 3400), tolerance)
FROM sometable;
should work.
Ultimately, you can always test the difference using measures like ST_Area
or ST_Npoints
one with 4326 and one with 3400 to get a feel for the differences.
As an aside, there is an alternative simplification algorithm you might be interested in, called visvalingam-whyatt that might be of interest of you are doing a lot of work in simplification. The above links to source code form Mike Bostock the creator of D3.js. Also so mapshaper for a working example.
ST_SimplifyPreserveTopology(ST_Transform(geom, 3400), tolerance);
Perhaps I should make this an answer and try and explain myself a bit better, which is hard to do in comments :-)