I was thinking of options , and basically Kates sketch would be along the lines of what I am thinking . Just some obvious things -- you have a chimney -- do you want that in your Master ? You want doors off the front Den -- no matter what you do , that will cost reasonable $$$ , as you will have to alter the framing , maybe electrical , as well as obviously cutting through bricks . Could 'just' having screens and maybe even a small roof creating a courtyard in front , using the existing front door and probably creating a better entry experience if done right , be better than that ? Same with things like having an external door from a laundry/mud room ? If that was important , personally I'd incorporate that as part of the new addition at the rear -- its way easier to design framing and walls with a door included , as opposed to modifying a 60 year old building . Basically , we could question every room , and that is what the designer should have done . Without asking , I'd come up with a totally different design , but it would be what I would do , and maybe wouldn't be what you want . And as far as adding upstairs , again personally I wouldn't . Engineering wise its difficult , matching styles is difficult , and cost will be quite a bit more per metre than adding on the rear , but you may feel the advantages outweigh the costs -- only you know .

retain the second living area, better resale value as more rooms and you will find it more useful the longer you stay. until the children are in primary school they will want to be in the same living room as you so they will play out in the back living area but over time you will be happy to have a separate play room full of toys you dont have to look at constantly while in the kitchen. I would definetely put both children in 1 room for at least 5 years then you will have another room that could become a third adult sitting/reading area. courtyards let in light and could almost become the second living room, or could turn out to look neglected with dead plants and somewhere you have to sweep up all the time its windy?

always best to plan the long term extension and then do the work in stages rather than make changes that may block future improvements but what is the width and length of the whole block and distance of the house from all four boundaries, can you drive into the backyard and is there an existing garage ...your site plan suggests extra space at the front that could potentially be used better but some photos and a Google Earth view of the roof would help and keep in mind your children will not be small for long and i would never have a free standing bath at the expense of a separate toilet there must be better options for the new bathroom but before changing the old bathroom you should consider the whole house

I would say that a house needs to built with correct orientation no matter what the "facing is". North is where the winter sun is so it heats your home up without using a heater constantly. if you face west you get the hot afternoon sun in summer. so ideally a rectangle block with the short ends east and west, and the long sides north and south. But developers cram as much as they can into their developments, so the perfect block is not always able to be purchased. but if on a acreage, then you should build to the views and facing north, always depending on climate as well. I would say that a block that has the front door facing north, is not as desirable as a back living area facing north. in this particular case, it is a shame that the garage is in the prime solar passive position.