Wait -- if you sell the house, will you get $400K equity + $300K to buy the new house? Or is that $400K equity total, and you will use $300K of that to buy the new house? If the former, your numbers are right; if the latter, the 4% rule doesn't get you anywhere near $40K.
Otherwise, I would go with your Monte Carlo simulation. The really good news is that you are only 5 years from being able to take SS -- not that you want to, but if the shit really hits the fan, you have a significant backup option there. That gives you a lot of flexibility to adjust your plan as things play out. Good luck!