We wound up not going for a door with a larger window. I deferred to my wife on the design decision, and she liked the steel door with the arch-shaped window set high in the door, so that's what we got. It looks great.
The old door frame came out pretty easily with my pry bar. We were lucky that the sub-floor at the entrance was perfectly level, so we didn't have to do any fancy leveling tricks. We laid down some adhesive flashing on the sub-floor before placing the door/frame into the opening to prevent moisture from collecting under the door and to direct it outside. We shimmed around the door-frame with cedar shims, drilled pilot holes and sunk long construction screws through those into the 2x4s surrounding the frame. We used insulating foam around the frame to fill the gaps. I installed a deadbolt and doorknob set that matches the one I previously put on our front door. It's the kind that can be re-keyed in a few minutes (I think it's called SmartKey) using the old key, a little metal insert, and the new key. I will be re-keying it to use the same key as our front door.
I still need to get a hold of some molding and properly install that around the interior of the door, but for now the door locks and is adequately sealed up.
My one issue is that there is a bit of a gap between the door threshold and the (rather rough) edge of the linoleum. I'm thinking I may want to replace the threshold with a wider one which will cover the gap, but that should hopefully be straightforward. Considering that we will likely replace all of the flooring in our house in the next year or two, I might not worry about it for the time being.
I appreciate all the tips and advice. In all, I spent $310 to get the door, 2 packs of cedar shims, a roll of door/window sealing tape, and the doorknob/deadbolt. I saved over $800 off the quote I got for replacing the door, I learned something, and I got to spend some quality time with my dad. Overall I'm calling this little project a success.