Re: Moving into a REALLY small house...Good Idea or Bad??
I would do it. DH and I lived in less than 400 sq ft when we first married. At first I thought I'd go crazy, but in the end I loved it and now want to always live in smaller spaces. It made us only keep things that were really important and it kept us from buying things we really didn't need. I learned to be creative with organization (wish I would have had Pinterest then!). We have around 600 sq ft now with our baby, and it feels too big after living in our first place.
If nothing else, it's temporary, it's good financially, and will probably benefit your family in the long run. I'd definitely do it.