Dilemma: what to do about the carpet

When we were first looking at our house we noticed the carpet in our front room was a little worn.  That was 10 years ago and the carpet still remains.  I vacuum once a week and we've steam cleaned it a few times but it's definitely looking a little more worn.  I see three possible options for it and right now we are debating between the three.  I have my preference, Matt has his, and then there is the cheapest and easiest option of just letting it stay as is.

Option #1: Leave the worn carpet

Benefits:
- it's nice having carpet for Luke running around.  It was also really nice for all the knee walking I did when I couldn't walk on my two feet.
-it's the cheapest option
-it's the easiest option

Downsides:
-the carpet is looking worn, especially on the main walking paths
-there are some weird stains in the corners from previous pets


Option #2: Tear up the carpet and replace with carpet
Benefits:
-see previous benefits to having carpet for falling or crawling
-possible padding for baby #2

Downsides:
-expensive
-pain in the butt to install ourselves or pricey to have someone else install
-stuck with whatever we pick and sticking next owners with that

Option #3: Tear up carpet, buy large area rugs.
Benefits:
-still get the some of the benefits of carpet with padding around the couches and main play areas
-very easy to install
-we would take any rugs with us, putting no additional money in the house we wouldn't get back
-no carpets to collect dust and the rugs are very low pile

Downsides:
-possibility expensive, I'm guessing close to the same cost as carpet (if not more)
-still the work of tearing up the current carpet, tack strips, padding, staples, etc.
-we don't know what condition the hardwoods are in underneath.  We've found that there is usually a reason people cover things up...
-We would then have replaced all the downstairs flooring in this house other than the front porch and Matt's office (which could come up with this carpet) and none of it matches...  Currently we have 6 different floors in our downstairs; we've installed 4 of them.  Seven if you count inside the coat closets.

These are kinda what I'm thinking for rugs - the blue would go in the front part of the front room, in the tv area (where the walls are blue) and the green under the dining table (where the walls are green).  

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Conclusion: 
Shockingly, my preference is to tear up the carpet and replace with rugs.  Matt would rather do the really cheap and easy option (leave as is) but if we're going to spend money would prefer carpet.  He's usually all about the original wood (see: our continual disagreement about painting the trim in our bedroom) and I'm usually for carpet.  For now we're sticking with as is but I don't know that this carpet, that we thought was a little worn 10 years ago, will hold up for another 5 (how much longer we hope to be here). Have you ever torn up anything in your house to be surprised by what it hid? (We have.)