Yeah, that is a weird fit for your lot. Nice sized backyard, though. I'd trade you back yards without blinking.
We are in a similar position and debated remodeling vs moving. We love our location and (most of) our neighbors, so we just recently opted to remodel (signed our contract last week actually). When we figured out how much longer we were planning on staying in our house, the cost really made sense, even if it is an aggressive remodel.
I feel your pain with the garage. Our two-car garage suuuucks. I dealt with it for years, but last year I took everything out and just parked the cars in there for perspective. Then I gradually put in things that needed to stay out there and couldn't be put anywhere else. It made a big difference. Dumb stuff was taking up space when I could find a better spot for it. I recently completed some under-deck storage for our bikes, mower and power washer. That was a life saver. It's still small, but my aggravation level with my garage dropped 90%.
When we are done with our remodel, our house will be valued much higher than those around us, and I know we'll never get back what we put into it, but we're ultimately the ones living there. I'm guilty of being house-jealous with some of our friends' larger newer houses, however we wanted our house to feel like our house.
My advice to you is to take advice, but ultimately decide what works for you. Don't be afraid to go with your opinion, even if nobody agrees with it. If moving makes more sense, go for it. But do it because it's what you want. It'll always be easier for others to suggest the higher priced shiny option when they aren't the ones footing the bill.