Thanks for the replies, everyone! You've all given me and my husband a lot to think about. We had a good discussion, and for now, we've decided to postpone our remodeling project at least another year, in order to be sure we have our financial house in order.
The argument to stretch ourselves on retirement savings now that we are still young(ish) is a compelling argument. In 12 years, when our first goes to college, we can possibly dial back a bit to contribute to their education.
My husband works in finance, and for that reason, I do always concern myself with layoffs. They hadn't had a round of them for a long time, but just last month they laid off over 200 people! No one could discern any actual reason, and while I am confident in my husband's performance (he got a 6% raise and a 26% bonus), such events can certainly make one feel a little disconcerted.
This thread definitely brings up the differing viewpoints on a mortgage. Prepayment is satisfying in its immediacy and guaranteed return. But my biggest fear is that, in the event of extended job loss, we might have to sell to unlock the ca. 100+K equity we have in the house. If that happened, I would be kicking myself for prepaying. For that reason, I think we will likely open a taxable investment account, probably the VBIAX, and automate about $150 a month deposit (or more?) into this. Based on my cursory reading, it appears to do pretty well in a bull market, and in a bad market still returns slightly over our interest rate. Like Wolf, I will consider this my emergency mortgage account. Even starting with the 10K to open it, that could float us for 10 months of mortgage payments in the future.
Other than that, we will probably max the Roths first and then work on increasing the 401K contribution. This will still leave us with around 35K in liquid cash.
For those of you who recommended either the Roth or the 401K first, do you mind sharing your reasons?