Kristen, Chuck J told me about your blog and I've just started reading lately- and this one resonates deeply with me.
When we did our two years building with HFH in MS, David re-designed the home.  It was at the homeowners and board members request, adding things like a broom closet and creating slightly bigger bedrooms.  Many of the out of state volunteers who came regularly fought the changes, arguing that the house was now too nice "for them"- though it was obviously still below the standard most of them came from.  It was infuriating.
Closer to home, we struggle with some of the same questions about our house- is it too small, or is it just that our American expectations are too big?  We're just undertaking a sunroom re-do, but not the discussed second story add-on...and how should we re-do, anyway?  How nice is necessary?  We've become big fans of the idea that it's not so much more space, but better space, that we need (have you read the "not so big house" books?)  It is striking to us that our home has felt both too nice and too shabby at different times with different guests.  
I'm rambling now, but great thoughts, thanks-