At the command of demons, you Romans have established games and public entertainments to the destruction of your own souls with some idea that doing so you will save your bodies. While Augustine does say that if we must choose between the two we ought to choose our soul over our body, he is more concerned to point out that the whole thing is a false dichotomy.
In this chapter, we see the basic nature of the unregenerate heart. Those outside the grace of God learn nothing from adversity, and only drive ever further in to their rebellion against God. Trial after trial comes, and they continually refuse to repent: "Depraved by good fortune, and not chastened by adversity, what you desire in the restoration of a peaceful and secure state, is not the tranquility of the commonwealth, but impunity of your own vicious luxury."
Even the mercy that protected the unbelievers through the calamity does not bring around the "ungrateful": "That you are yet alive is due to God, who spares you that you may be admonished to repent and reform your lives. It is He who has permitted you, ungrateful as you are, to escape the sword of the enemy..."
Whether being shown judgment as in chapter 33, or mercy as in chapter 34, we see that outside of the grace of God there is no repentance or faith. Even the example of Romulus and Remus, "a remarkable foreshadowing of what has recently occurred in honor of Christ," brings the Romans no credit, for they refuse to turn and embrace the forgiveness offered in the Gospel.
Through all of these reflections, we should not get discouraged. In fact, as Christians we should remember that among those who are currently railing against us are "those who are destined to be fellow-citizens," while among our own numbers there are "some who shall not eternally dwell in the lot of the saints."
I think this is an important point In an age that values niceness and getting along and not making people feel bad about themselves, we easily forget (or just don't want to admit) that there are a number of people in the congregations of the church who are not believers. (That there are people who have not yet been reached is perhaps less controversial--any church which does missions or evangelism believes that!) One can verbally confess the faith, partake in the sacraments, and worship weekly with the church and still not be part of the City of God.*
Rather than getting hung up on either of these truths, instead we need to remember that "these two cities [the city of man and the City of God] are entangled together in this world, and intermixed until the last judgment effects their separation." When we are tempted to be frustrated by the church or the world or both, we need to remember to raise our eyes to the coming heavenly city and the time when Christ shall return and set all things to rights. Until then, we can patiently endure all things as we wait with our eyes firmly upon Christ.
The shape of things to come! Augustine explains the difficult task he has set out for himself in City of God, including the sovereignty of the true God and the emptiness of false deities; the hope of heaven found through the Gospel; and the careful distinctions which must be drawn between Christianity and the greatest philosophical thought the world has to offer--thought which we often might agree with on some points but which at heart will be found to be of a different spirit from that of God.
*If this is something you want to know more about or something you struggle with yourself, the greatest work of theology published in the Western Hemisphere (so far) deals with this very topic: The Religious Affections by Jonathan Edwards is an indispensable must-read for every Christian's bookshelf. Assurance by John Owen is also quite good, if quite a bit more difficult in its prose.