I was at that crossroads for years, battling homesickness after the birth of my first DC in London. I have a UK spouse though so things are slightly different and somewhat complicated as we are always missing one half of the family!
We did return to NZ but missed our UK family too much and returned. I thought I had prepared properly and knew all the downsides to adjusting back to kiwi life, but there were still things that surprised me. The nice thing was to feel at home. Being near my family was nice but a bit of a shock too after so many years. What I dislike in the UK is that it is very difficult to replicate any sort of kiwi life here, not much laid back about the UK, but as you mention there are certainly many advantages.
NZ as you will know is very expensive now, standard of living I find is much better in the UK in that houses, cars, fashion, variety of food, restaurants, travel etc is much better here, but quality of life is excellent in NZ as long as you have a decent income. Food, meat tastes better but less choice and very seasonal (which I like) but no popping to M&S for a nice pudding or treat. Auckland property prices are insane, but as you're in London it wont't be too much of a shock, however not many people on London wages.
I am not in England anymore, but we do kind of regret coming back. Education for our children where we are is pretty dire and I really wish I had looked into that element more before returning.
It is difficult making the adjustment back, set yourselves a period of time to settle in (some say 2 years) and then evaluate from there.
Try not to burn all your bridges in the UK. Could you go on a career break?
I say do it, based on the factor that you want your children to be surrounded by family, just remember that you as parents need to be happy too. It is perfectly possible to grow up not surrounded by family, just depends whether you want to do that or not.
Prepare yourself to be comparing for ages, integrate yourself back like you are an expat, try new things and find new friends as well as rekindle old friendships. I found it quite difficult but not impossible to integrate the new me, with the old me....it takes time.
The way I look at it, we are lucky to have the choice of two great countries to live in. You just have to make the most of each country's strengths and don't look at FB at all during the UK winter when everyone is at the beach and on holiday! I love the UK Xmas but I miss simple summer holidays.
We have returned to the UK and are renting and being a bit apprehensive about putting down too many roots until we decide whether it is UK or NZ for us!
Good luck!