#2 because you'll always wonder. Don't do what I always do and go with what seems safe and comfortable, then end up wishing you had taken it a step further. If you have the chance to do something cool and open up your career, I say go for it. Also, you have a family now and more money/time and less commute are big factors. I think so anyway.

Also, you already told #1 you needed to think about it, upsetting the manager and making yourself feel bad. You can't undo that, even if you do take the job. There's a risk that even if you take it you still might feel like an a-hole, the manager might still feel upset, and that might lead to starting off on the wrong foot anyway. You know?