I am actually very pleased/surprised by all of the responses. They are all appreciated. I will make an attempt to respond to everyone here.
Rental Income: In regards to rental income, I don't track monthly cash flow for the rentals. I simply operate such that the property account pays for itself. The net cashflow after depreciation and is approx ($10k) deduction. My feeling is that most of the monthly cashflow is allocated to other things like maintenance and vacancy needs. But every few years I will pull out a couple thousand dollars out of the account. I dont track it because I would rather it be more like a business account that I can't just steal from. The big win from the rentals is that I pay almost zero taxes every year and in another 15-20 years when the loans are paid off, that is a pretty huge deal too. I took a look at the spreadsheet and didn't see anything laying out the rentals other than a total net cash flow/deduction. You could say that I am saving ~10k+ per year just due to principle pay down...I am a hobby landlord, I dont treat is much like a business and am not very rigid in my planning, but I know that in the long run it will be worth while will minimal efforts.
Groceries/Dining: This is about the only discussion that my wife and I disagree on with regards to finance. I think 1000/mo is a good number to shoot for, but my wife struggles with it a bit. This is something for us to continue to focus on. Any tips on reigning in grocery spending would be appreciated. We feel like we just buy the necessities and spend about $700/mo total on 2 trips to costco per month and usually about $100/week supplementing at the local Cub grocery store. The eating out thing is fully in our own control and is something that we need to just be more diligent about.
Hair Cuts: This is a good suggestion. I have considered this in the past, but have never had enough nerve to make it happen. We do have a decent clipper we purchased when we were first married so my wife could cut my hair. She was so nervous it would take about an hour or more to do it. Although it turned out nice, I couldn't handle that long in a chair, so we gave up. I would be fine doing the kids hair.
Clothing: My wife looked at the numbers provided and laughed when she saw the clothing budget. She mentioned exactly what lakemom said, often much of the target bill is clothes...more research to do there.
Karate: This is a really hard one for us. This is the only organized physical activity the kids do. It is very expensive, but they all enjoy it and it is about a mile from home. We get there 4 times per week. We have discussed quitting, but haven't been able to justify considering we don't do a lot of other activity other than the occasional bike ride into town for the farmers market.
Music Lessons and other classes: Music lessons is likely the first to go. This is another hard one to swallow considering both my DW and I are hobby musicians. Our 13 yr old is now really starting to excel with her voice and piano. She even picked up the guitar and learned to play a simple three chord song(singing and playing) she heard on the radio in a few days. We were amazed.
Camper: There is a long story about the camper we currently have. The reality is, the 401k loan was taken out around the time we sold our previous suburban and had our previous camper totaled out by insurance. The value of both truck and camper was ~$21k. We purchased replacements that cost ~$36k, so although I attribute the 401k loan to the camper, it is really for both the camper and the 3/4ton suburban necessary to tow it. I know that doesn't change the recommendation, just for clarity. My DW and I have talked a lot about camping too. It is possible that we will end up selling the camper and truck, we need to get through our summer before deciding. What makes this one difficult is our family uses camping to create memories. We never camp alone. 90% of our camping is with Gma and Gpa and cousins. We rarely get to gma and gpas town, but we meet them in the middle 3-4 times per season. We shoot for 20 nights per year to make us feel good about it. Based on 12 years of campers buy and sell prices, our avg per night cost of ownership to date is ~$12-15/night of camping. We have sold both previous campers for nearly the same price we paid. If we sold our camper today, I estimate we would have a total of ~$3000 in camper costs over the last 12 years.
Motorcycle: I have had a motorcycle constantly since I was 12 years old. My children have a small motorcycle that they have each learned to ride within weeks of learning to ride a bicycle on 2 wheels. We are a motorcycle family. I purchased my motorcycle new in 1999 the year before I got married and plan to keep it until I am dead. I may change motorcycles after my kids are grown, but at this point in time, motorcycling is a lifestyle choice that I could/would not give up. Just like MMM would never give up his bicycle, I would never give up my motorcycle. It is likely that as the kids get older, there will be more motorcycles in the garage, not less...
Overall, it is pretty clear that there are some lifestyle choices we have made that make up a pretty big part of our budget. It is pretty easy to see when someone points them out, but when you stare at the same spreadsheet for years, it is harder to be critical. Any further/followup comments are appreciated.