S.S.
My husband & I went through this decision last year when our daughter was turning 1. One of my sisters lives here and adores our daughter but has a lot of inherited financial issues with her husband and his 3 kids and child support. Since we are both from Montana, we used geography as a main reason when we told her we were chosing my other sister to be our daughter's gaurdian.
We both feel that grandparents as gaurdians is unfair to the grandparent/child relationship. But since we both have young parents, my parents are a 2nd choice. Between us we have 2 brothers & 4 sisters.
We chose my sister that I didn't even get along with well when we were children (we're very similar). We wanted to think about our daughter's long-term well being. And since we have 3 sets of parents (my parents are both remairred) we needed someone outgoing enough to keep all of the relatives in the loop. She's great at socializing and her husbands parents are both remarried so she's well versed in balancing all of that "stuff".
Keep in mind that you 1) hopefully won't need this option soon and 2) can change it if your choice changes.
Before we decided, we talked to my sister to see if she was willing to do it. His sister was also a final choice for us, but she was not interested.
We waited to talk to those we were not chooisng until we were completely sure. And then we had to choose the right time - we didn't just tell my sister here just to tell her. We waited until it seemed liked a good time - it actually happened in a conversation that wasn't even planned.
Hope that helps.