Tinstaafl,
It should be PA, because this formula is not considering the affects of Temperature, only Pressure Altitude.
If you put DA, then we have to have another formula or use the flight computer to first find Density Altitude (using Temperature) and then use that value in the formula posted by mfclearner. So you'l need 2 formulas!
This formula for TAS is a rule of thumb that considers only the affects of Pressure Altitude. It is sufficient enough because the affects of tempature on TAS is far lower than the affect of Pressure on TAS.
mfclearner,
The formula is correct. But essentially all you are doing is adding 2% of IAS per 1000 feet of pressure altitude. So, suppose you were at FL80, thats 8 * 2 = 16% correction. If your IAS is 200 knots then your TAS is simply 232 knots (16% of 200 is 32).
So its 2% correction per 1000 feet of altitude. This way of approaching it makes it very easy to do it in the air in your mind than thinking of the formula.
The reason why the answers are off is, as you correctly noted, the lack of use of Temparature as a variable. It is only a rule of thumb. But even 5 knots off is okay enough for mental calculations. For example, if you are using speed factors to calculate things like Top of Descent, etc (240 knots is 4 miles a minutes, 270 is 4 and half, 210 is 3 and half) you are rounding up or down by 15 knots there anyway.
If you want to be more picky, you can do a quick ISA deviation check at your altitute using the OAT. If it is a +ve deviation (the air is warmer than standard) the result of your TAS calculation is tending to under-indicate (since due to lower air density you are having to move faster to get the IAS). If it is a -ve deviation (cooler than standard atmosphere), the result of your TAS calculation is tending to over-indicate. You can then round appropriately for Speed factors. For example, on a day with -ve ISA deviation, if you found your calculated TAS to be 198 knots (more than midway between 180 and 210), when usually you would round to 210, Today you can round to 180 as you know your actual True Airspeed is closer to 180 than 210.
Note this sort of correction is in affect, making use of Density Altitude
Hope that was useful info.
Regards.