I'd start with determining what sort of asset allocation you are comfortable with - not in your 401K, but across your entire investing portfolio.
If you end up with a heavy weighting in equities, and the S&P 500 can help with that, then I'm hopeful that the math will allow you to put ALL of your 401K in the S&P 500 option for 2 basis points - you won't be able to beat that anywhere.
Then, outside of your 401K, you can invest in Vanguard funds that cover whatever is missing in your ideal asset allocation. Vanguard has value funds, international funds, emerging market funds, etc. - all way cheaper than the options in your 401K.
I think a lot of folks try to optimize their asset allocation within a 401K, but when you have some cheap / good index options and some really expensive other options, it's best to not view your 401K in a silo but as part of your total portfolio.
And I guess one added bit - if the rest of your portfolio is really modest, you can probably find a lot of savings ideas on this site :-)