Without knowing exactly where you live and the choice of schools I'm afraid none of us can give you a decent response.
I totally agree that you shouldn't feel you should send your child to the private prep just because you can afford it and it is just over the road.
However, you give a number of reasons why you don't think the school is right. Which one is your main reason?
- are the parents snobbish? (This is a wide generalisation and while it may be true for some, I'd argue there is now way every parent in any school will be like this. Also until you send a child to a particular school you can only go off hearsay, which may be wrong)
- is it not diverse? (Do you know this for sure?)
- not sure it's worth the investment (this is the million dollar question and impossible to answer without knowing your child, your background, the school and having a crystal ball).
Everyone has their theories about education, but I'm definitely of the opinion that primary age is very important to instil the basics and a lifelong love of learning. With the right building blocks in place, a bright 11 year old can still do very well at a mediocre secondary school. Therefore if money was an issue, I would always pay for the best primary education and choose a state secondary. But I know many on here would disagree.
As an aside, would you have to drive to the local state school? It's a small point, but the time and petrol saved over the years by going to the school over the road will really add up!
Anyway, there is no right answer. All you can do is visit the schools, talk to teachers and prospective parents and form your own judgement. Then make your choice and don't feel the need to justify it to anyone!
Good luck with your choice