Our last 2 retirement houses have been 1300 sq.ft.; wife doesn't want anything larger to take care of.
We have laminate wood floors, which are much easier to care for than carpet. With your wife's health problems, you should make sure that the material used in a new house doesn't contain any chemicals that will outgas and cause problems for your wife or yourself.
A new, well insulated house is the best way to go, with all the handicap features that you may need. In you area, radiant floor heating is the best way to go.
Remodelling is essential "double labor", so unless you have free labor, it is not a good idea to my way of thinking.
Have you thought of moving the old house somewhere for another rental and then building a new house at the present location?