Bit late to this thread but my $0.02 :)
The best place to live depends rather on what you're looking for in NZ. We love Nelson but realise it's not for everyone. If you take a look at the Emigrate NZ forums there's a section called "Locations" which has a few threads on different areas, good places to live in each city, good points and bad points.
Parents and family left in the UK is always going to be a tough one. We've been here 2 years and keep in touch with regular Skype calls. Christmas morning we moved the computer upstairs to the living room and the children opened presents with all the family there via Skype - was good. (Then we spent the rest of the day with a chicken & stuffing & salad picnic on the beach which was also good!)
How long you put your life on hold again depends on what sort of family situation you're in currently. We talked to both sets of parents before leaving - FIL thinks we're mad not to have moved here years before we did, MIL is looking at moving here with us and my own father has visited twice for extended periods since we've been here. I think we have actually seen him more and certainly spoken more on phone calls and things than we did when we lived an hour away from him. My husband is an only child though so it's easier for him as he really only has his parents. I do miss my family but so far the benefits of being here have made me very happy about the move. My niece and nephew are growing up and doing their own thing, my brother and sister have their own lives and we keep in touch regularly. As far as the visas go, you can stay here up to 6 months on the regular visitor visa (if you're from a visa waiver country) in any 12 month period. The grandparent visa allows for multiple entries of up to 18 months total in any 3 years with each stay a maximum of 6 months (but no time limit between stays, so you could stay for 18 months and have a weekend trip to Oz twice in the middle to fulfil visa requirements).
Cost of living - DH thinks that when we moved here (2 years ago) the cost of living was approx 2/3 that of the UK, but the salaries were about 1/2 so it was in real terms more expensive here. Books, clothes & shoes definitely more expensive, food I think is about the same or cheaper (we use the local vege shop for fresh produce and pak'n'save for the rest).
Small size and limited economic future - that depends on what happens to the world when the oil runs out plus/minus global warming hits! I think NZ will be one of the more pleasant places to be :)
DS1 starts primary this year, can't decide if I'm looking forward to it or going to cry. Probably both :) Schools here in particular are excellent, there isn't a single one I wouldn't send the boys to. There is also something called One Day School where G&T children can attend and most schools are keen on sending the brighter ones along. For younger kids there is Small Poppies (the equivalent of ODS at a nursery age).
Generally for young children NZ is great. Playgrounds everywhere, most schools have at least 2-3 large climbing frames and a swimming pool. For older children/teens I think it can get a bit difficult unless you're very sporty. There isn't so much going on as the UK in terms of weekend activities/museums etc.
Healthcare I think is better than the UK although less is funded - prescriptions are cheaper, but many surgical procedures aren't funded on the public system so if you want them doing you need to go privately (and therefore need insurance). There is also a reasonably long waiting list for many things (over a year in some cases).
Sorry for the essay! In general while there is a lot that I miss about the UK (family mainly, M&S foodhall occasionally), there is nothing I would move back for currently. We have really settled here and the boys in particular are thriving. There is also a lot about the UK I'm very pleased to have left (mostly the politics/economical situation).