There are so, so, so many threads on this very topic. Please search the forums.

Also, if you haven't done so already, read the wiki page "Damage". This is the single most important rule of Spiral Knights. Iron Slug and Callahan do different damage types, so they aren't really comparable.

Also, it seems that you're choosing your equipment by first getting a Magnus, and then trying to figure out which way to upgrade it. Instead, plan your equipment by looking at the *5-star items*, choosing which ones you want, and then looking back in their alchemy paths to figure out how to get them. By using this method, you will avoid getting stuck in an alchemy path (e.g. Winmillion) that doesn't go anywhere. For example, it's entirely possible that you want neither Callahan nor Iron Slug.

For us to give you better advice, it would help if we knew your other weapons. For example, if you're carrying multiple guns at a time, then it's hard to imagine that you'd want a normal gun like Iron Slug in there. If you're very fond of Blitz Needle, then it's hard to imagine you'd also want to carry Callahan.

You have a nice variety of stuff. All that you're missing is: shadow sword, piercing gun, and lots of bombs.

You should have a piercing gun, but you don't like Blitz Needle. That pretty much seals the deal. You want Callahan. For example, a great gunner loadout would be Storm Driver, Umbra Driver, and Callahan.

If you're going to play hybrid, then Callahan is still fun, but the piercing swords are more effective against fiends. A great hybrid loadout would be BTB, Storm Driver, and a shadow sword or gun.