so your argument sounds like it is coming down to space vs. location:
i live in a tiny shack in bby, so i can tell you my perspective.
the pros for location are pretty obvious, so i don't know how much i need to touch on this. basically, location directly affects your time spent doing what. consider all the places you currently visit and add whatever time it takes to travel there from coquitlam*2. work, church, friends, family, etc.. Say 30 minutes extra for work a day. maybe another 30 for church, 30 minutes to visit your parents, 30 minutes to visit your in laws. that adds up to maybe 4-5 hours of waking time a week that you could put towards other things.
the eventuality that will happen is you likely makes less trips out, b/c realistically how much extra time do you have to spend on travelling in your current schedule. you eventually prioritize and making that trip out becomes less "worthwhile".
more space - pros:
besides having the ability to have more stuff, i also think it'd be a benefit to have your own "safeplace" in your own home. in a small space, i think it's really possible to get on your spouses nerves and vice versa. More room does help mitigate that in my opinion.
less space - pros:
having less space, also means prioritizing your space too. in a way it helps you to curb the stuff you put in the home... i have probably had this conversation with the wife a hundred times. either her or me, "I want to get this." "That'd be nice, too bad we don't have anywhere to put it." as an analogy, it's almost like having a salary cap on what you need to get by... since you learn to live with less stuff, you just adapt to it.
for me, in the end i think i value my time more than space right now. i think personally i adapt better to having less space, that i would to having less time to do stuff i wanted to do. but i currently have the benefit of only needing to make a decision based on what's best for my spouse and i and not a family with young kids. and i figure that will weigh heavily on your decision as the difference could have a significant impact on your family.
i also think that having less personal space for your kids as they grow could force them to prioritize their space as well and forces them to adapt to that situation too. which i guess you can see as either a good or a bad thing.