I don't know how the taxes would play out, but selling that $750k house to buy the much smaller/cheaper place and then invest the rest sounds wisest to me. If you're not capable of doing much you'll need to contract out a lot of repairs & property management, which will make it much less profitable.
If your wife makes $30k and plans to continue doing so for awhile, you can keep that stash growing for even more security. However, I'd say that if you're living on less than $30k (presumably, since taxes eat a part of that), you could absolutely retire on that stash. You'd have to be prudent, but that's right at the 4% safe withdrawal rate. Your wife could even substitute teach if she wants to stay current, work a bit, and have a foot in the door...all the while staying flexible for whatever ya'll want to do after FIRE.