re: Is avoiding PMI that important?

One more gentle suggestion: start "editing" your possessions now. If you plan to move in the next year, you'll need to do this anyway. Go thru all the kiddie crap, have a garage sale/eBay/craigslist what you don't use, do the same for hobby/rec stuff. You can make a little extra scratch to put toward a new house, will make your current circumstances less crowded, and will give you an appreciation for how much space you really need.

With oil where it is, I'd be waiting a bit to see where the housing market is headed (assuming you're in the oil patch areas).