Is there another bedroom upstairs where you could sleep? Moving up there would solve your proximity problem in the most decisive fashion possible. And you'd already be up there in case the smoke alarms went off too, to help your kids get out of the house- a statistically more likely emergency than a home invasion. Kids as young as yours WILL need help in an evacuation.
The top of your stair case is by far the most advantageous position you have from which to defend your children upstairs- you should not yield it lightly.
No matter what, you need to harden the perimeter of your home as much as possible- doors, windows, any means of ingress/egress. That means upstairs as well as downstairs. Locks on windows, good solid doors with first class locks, reinforced hinges and strike plates on the doors, motion detector interior and exterior lighting, a good alarm system, cameras etc. No one should be able to get into your home without 1) making a LOT of noise, and 2) being significantly delayed in the attempt.
Get a dog.
Get a dog.
Get a dog. Got it?
Your kids will love it. And a good dog is a self-mobile alarm and intruder deterrent.
Work on your emergency planning for fires, storms, power outages, as well as intruders. You should have a Plan A, a Plan B and an UhOh Plan in case the first two don't work out. You should actively drill your plans so every family member is familiar with them.
If it is too disruptive to family harmony to give up the master bedroom and move upstairs with the children, your plan IMHO should definitely be for you and your wife to stage a careful deliberate move to the upstairs. You should be fully prepared to encounter an intruder or intruders along the way, if indications are strong that entry has been accomplished- which is the only reason you should be on the move. Having a hardened perimeter, a dog and an alarm system activated at night will help you confirm that 'bump in the night' is really something to be concerned about.
In preparation you should set up a safe area upstairs. By arranging furniture you should provide an area that is safe from incoming fire for your wife and children to bunker down in. You should have both a landline phone AND a cell phone there, just in case. Intruders can cut a phone line before entry or disable your phones by taking a downstairs extension off the hook. A working cell phone is a necessary backup, even a working cell phone with no service can still call 911. Perhaps a remote control for the alarm panel can be located there too, as well as remote control for downstairs lighting (X-10 controllers or the like).
You will want to find a place that lets you cover the top of the stairs, preferably from a prone position and from behind cover.
You'll need a spare set of house keys, front door and back door keys clearly marked and attached to a chemical light stick, to activate and throw down to LEOs when they arrive. That way they can gain entry without having to break in.
I strongly suggest taking the NRA's
Personal Protection In The Home class (PPITH), or at least get the manual and/or see the training video. I also like Louis Awerbuck's
Safe At Home video. Here are the links:
PPITH class locator:
http://www.nrahq.org/education/training/basictraining.asp
PPITH Manual-
http://www.nrastore.com/nra/Product.aspx?productid=PB+01781
PPITH DVD-
http://materials.nrahq.org/go/product.aspx?productid=ES 26840
Safe At Home video-
http://www.paladin-press.com/detail.aspx?ID=1500
Hope this helps,
lpl/nc