It's a tough one Scream. Although we didn't argue about it, it was a discussion that went on for months before we made a final decision.
Our options were, our parents, DH's sister and her husband or my single sister.
We decided against our parents given their age and decline in health. (Nothing major, just usual old-age associated ailments). If my sister were in a situation where she was considering having children herself I would have ideally have chosen he,r as she loves DS almost as much as we do. As it is she's single, loves her career and children aren't on her agenda at all so it seems to unfair a burden.
So we decided on DSIL and her DH. They have 1 young child of their own and will possibly have more in the future. We thought it the worst were to happen to us the best thing for DS would be to be brought up in a family with children of a similar age. We are fortunate enough to not have to worry about him financially. We have enough provision for them to make any adjustments to their living arrangements (we'd want him to have his own room) and for his future.
It was sorting out the finer detail that we found harder. As it setting requests to make sure my parents are not left out. Christmases, birthdays,weekends, holidays etc and what happens if Dsis decides to emmigrate with him? Or move 300 miles away from my family? what if Dsis and her DH split up and living and financial arrangements change? All stuff that might seem extreme to be worrying about but stuff that we felt that was important but quite awkward to discuss.
I was worried about telling my parents but thankfully they completely understood where we were coming from and agreed that it would be in his best interest as long as they were able to have reasonable access and help with decision making etc. I still wonder if we've done the right thing as I've always struggled a bit with DH's family and it feels uncomfortable for me to not have my family as guardians. But really there was no better alternative.