We have a 26S, and we sleep in the v-berth. She's petite, so she sleeps behind the head partition. I'm 6-1 and 230...i sleep on the port side that is open to the long port settee. So i don't have anything to bump my head against. We do okay so far for one night at a time. Sumner does weeks at a time, so he extended his v-berth.
Once we get all the storage situated, we may try the big cavernous pizza oven in the back. It is quite large, and i agree that it would be better for fitting a growing family.
The other comment was just that with more than the two of us, it is hard to move about in our cockpit, particularly when sailing or motoring. So you do have to split up responsibilities and kinda stay put when under way. Or else you'll play musical chairs or leap-frog, sometimes both. With smaller kids, you'll fit fine. As they grow, you may find it a little cramped. You have to be okay with rubbing legs, bumping knees, knocking into each other, etc. because you don't really "walk around" in these cockpits. (Also, I've only seen the cockpit of a 25, never sailed in one. They may actually be longer than ours because they don't have the lazarette at the back end.)
But if you're creative, there are also air mattresses, sleeping in the cockpit with mosquito netting, hammocks, etc. You can make it work if you want, especially if you get along well as a family. I agree with most of the advice that's been given already. Go sailing with someone and see. Put all five of you in someone's boat and see how it feels. Check out the 26D & S also to compare. It is worth taking the time up front.
