Transfer the old 401K to a traditional IRA. There is no tax affect to the conversion. You already got the tax deduction when the original contribution was made to the 401K so there is no deduction for it upon transfer, but you will pay taxes on it if you transfer it to a roth.
Continue to contribute to your 401K, and max it out if you can ($17,500). Depending on how much money you make, you should fully fund a traditional IRA ($5,500) each year in your wife's name, and yours if possible. Since she's not working, you should be able to do this for her, and you will deduct this on your income tax return each year. It stops becoming an option to deduct an IRA contribution for you once you reach about $100K in wages, so that's your cutoff for you. For your wife, you can make and deduct up to $5,500 as long as you earn less than about $180K in taxable income. If you make more than that a 529 plan, an HSA, or a Roth will likely be your best option.
Eventually you'll want to move all your 401K/IRA money into a Roth IRA, but it's best to do this after you stop working as your income will be much lower and it allows you to do it with a much lower tax burden.
I agree that you could spread yourself too thin with multiple accounts. However, the idea is to save as much tax as possible now in whatever way you can. If you've already maxed out the 401K, move to the next level. If that's a 529 because that's what's most important to you, keep it simple and just do that.
Personally we haven't funded anything other than our 401K's and a taxable investment account at this point since I plan to develop a nice size rental real estate portfolio which is much harder to do in tax deferred accounts.
Good luck!