I would not buy a house an hour away from my work if I could afford something closer, and the fact that your dad will help you with renovations on another place -- not just the one he already bought -- gives you the best of both worlds.
In terms of whether to get a bigger house or not, I think that depends on your priorities. Do you want to have a family? Do you want to live in the same place now that you will live in 20 years from now? Or would you be interested in renting it out if you do have a family and need more space? If it were me (and I know it's not, so maybe having a family is not something that appeals to you at all), I would consider buying either (1) a home for my family, with good schools and enough space for 2 kids, or (2) a place that's good for me now, at 23 (so, 1 or 2 bedroom apartment or condo or a duplex, in a young, trendy neighborhood), and easily rentable in the future when I move to somewhere that has more space and good schools. I would lean towards #2, because I don't like the idea of wasting space when I don't need it and it would be such a gift for your father to not just house you for a few years but to provide you with a lasting income stream.