How useful would it be to become self-employed and work on a contract basis with new employer (I could probably get them to swing for this)? Are the 401k benefits worth this effort compared to a IRA?
If you are self-employed, you are responsible for tracking and paying your own quarterly income taxes. This is a hassle, but not a huge deal.
However, part of being self-employed is you also have to pay both the employer and the employee portion of the payroll taxes (SS+Medicare) which is effectively an additional 7.65% that you have to pay instead of your employer. If you were high income and maxing out an individual 401k, this might be worth it but if you describe yourself as low-income, it's probably less ideal.
Plus, if your duties effectively make you an employee in all but name, your employer might get in trouble with the Department of Labor if they're caught. They may or may not be willing to risk this.
Are you already maxing out your IRAs? This is $11k total for both you and your spouse. If not, focus on achieving that and don't worry about the contract employee stuff until you're ready to go freelance.
As a general rule, IRAs tend to be prefered tax-efficient vehicles since they tend to have lower fees and more selection of funds.