Looks like you've already got lots of good answers. We switched our older son (now 5) to a twin bed when he was about a year old, when he started trying to crawl out of the crib. We tried the toddler bed for a few days, but he kept falling out of it, even with a little safety rail. He was just so big, he wasn't comfortable. When we transitioned him to the twin, we started with the mattress on the floor, then put the boxspring under it, then eventually moved it into a frame. He only fell out one time after it was moved onto the frame, but that's it- never when it was lower. We bought his loft bed when he was about 3 because we bought a house where his bedroom was less than 1/2 the size of the huge room he had in our rent house. We wanted him to still have the space to play underneath. There are rails all around the loft, and the only concern at first was him climbing up & down the ladder, but he was fine. He never fell at all.
When he was 5, baby #2 was born, and the older one would say, "That was my old bed, but it's my baby bro's now cause cribs are for babies."
Now we will be having #3 soon, and are in the same debate you are, since #3 will only be about a year old when this one's born.
We are going to just transition him to our older son's twin bed on the floor since he is already tall enough at 8 mos to lean over the edge of the crib & is trying to climb out with the mattress all the way down. We'll get a full size bed for the 5yo.
Our crib also transitions, but my boys have been too big to be comfortable in it. Maybe baby girl (#3) will be smaller and we'll be able to use it?