I had some friends who bought a house and then found out they were pregnant with their 3rd child, totally unexpected. They added on and when he got transferred they nearly couldn't sell the home because the selling price was so much more than the other homes in the area, they ahd to cover the loan on the addition plus the house itself. They finally had to sell it to the company that held the mortgage. I think this is something that needs to be researched by your family. Talk to a realtor or appraisal person and find out if the area can carry that much of a price increase.
As for doing renovations with kids in the house, you never know what you're going to uncover inside the walls or floors. Mold, mouse droppings, any number of things, things that can make the family ill.
As for keeping the house clean when selling and living in the home, it is terribly hard, you have to have a perfect house at all times because the phone might ring and the realtor is on the next block with a family that really wants to see your house.
I think the best way to sell a home is to live somewhere else while it's on the market. That way the freshly painted walls stay clean, the pieces of furniture you use for staging stay nice a tidy, etc...but that's seldom the choice one gets.