Stay further in would be what I would do, my personal view is that space inside home is overrated and free time is more valuable.

We live in Camberwell in a 2 bed unit with 2 kids, we may move but prob not for another five years or so. For us this location is so convenient and nice we would not move further out but therefore have to put up with limited space, but for us that is easier than longer travel times (look at what you do outside work on weekends etc and see whether diff travel times will affect that too). I recently got us an allotment which is great and makes up for lack of garden etc. I want to be able to walk kids to school, use public transport to get to work etc and be able to cope without the car and can do all that no problem. Lots of people think we are mad, most people seem to move out of area once have more than one child as can't afford bigger round here, but the longer we are here the less likely I think we are to move until DS and DD are too old to share. We often have relatives staying, at moment my brother, or one set of grandparents meaning 4 adults plus 2 kids sometimes - and we manage.

I would list all things that are important to you to continue being able to do, and any new things and work out if easier or more difficult in each place.