Thank you all for such great input. This has been really helpful to my wife and I.
Here are some answers to the questions that have come up.
Yes, we are looking to downsize to a condo in the $130K range.
We don't have any credit card or auto debt, just the $50K in student loans (average interest rate of about 5-5.5%).
We don't have cable or a landline, and spend about $300/month on entertainment (includes saving for vacation and eating out).
Overall we actually live on about $70K of the $80K we make but the extra $10K seems to keep going away to large expenses (washer went out, furnace and water heaters went out), which is why our Emergency fund is so low right now.
Our house is 40 years old (should have mentioned this in the original post) and it seems to be at the point where things are consistently needing repair and I think we are trying to decide if we want to continue to put money toward those repairs or sell before they are needed and move to a lower maintenance place and then eventually upgrade to a newer house after our debt is gone. We also have never purchased a home together. I bought this house before I was married and we like the idea of getting a place that we pick out together.
As for the 2-5 year time frame for staying in the new condo, this is very flexible. It would of course depend on many factors (savings for a downpayment, if we suddenly found a place that we wanted to move up to, what the current market is like at that point, possibly rent the condo out and move up, etc.)
I think the biggest benefit we are seeing to the move is that is offers us much more flexibility if a major life event were to occur (job loss/change, child, medical, vehicle, I drive a 10-year old mazda with 150K miles on it, etc.) and we don't want to have to go into debt if something were to happen.
In case you can't tell, we are leaning toward selling our house.
But keep the input coming. It is extremely helpful.