So the bank (credit union actually) finally came back with the bad news. Due to the current general softness of the housing marking, our proposed renovations don't fall in our range of risk. They are okay with the numbers on how much our monthly payments would be for the money, but due to their regulations, our amount borrowed compared to the assessed value after the full renovations would be about 87% - over the 80% they are comfortable with lending.
So now we have to go through the assessment process again (and pay the assessment charge again) with our alternate choice. With the numbers so tight, we'll forgo the third option (which would still give us a game room) for now. Rather, we'll try for the second floor addition and deck off the kitchen and look at adding the wing in a few years after the market recovers. This should be less intrusive and take less time in the short run but will end up costing even more in the long run.
At least the subsequent addition should not require us to have to move as much when it gets done. We will probably have to get a storage locker for some of our long-term items and work at getting some new sheds.
Of course, if we hit the Lotto Max in the next few weeks, all bets are off and we're back to doing it all. Here's hoping.