OK don't read my post on the Trondheim thread because I was having a right whinge about being a foreigner in Germany and believe it or not I'm here to say an unequivocal yes to going to Munich.
Munich is fantastic. Expensive but fabulous. It has the city feel (even though people from other German cities e.g. Berlin are a bit sniffy about how parochial it is) but you have scope for a great outdoors / nature filled quality of life.
There's the skiing an hour away in the winter and in the summer, it is generally warm and sunny with lots of scope for bathing in lakes, cycle runs on family friendly cycle paths, Alpine walking for all age groups, beer gardens, better fruit and veg than the UK (closer to source, lots of farmers' markets etc), better butchers, better bread.
For holidays you are only a six hour drive from northern Italy, within driving distance of Croatia, on Austria's doorstep, five hours from Prague - there is scope to see so much from Munich.
For kids there is great scope for being fit and active - most towns have a sports club where all kinds of sporting activities for all levels and age groups are offered, be it aerobics / fitness, judo, athletics, swimming, football, inline skating, unicycling (!) (just some of what's on offer in my small town).
You say you are into crafts and artsy things - Germany is the country for you. Crafts here are very big. The stuff my DD does in school e.g. for mother's day is just wow. This year she made me a pottery mirror and glazed it and it's lovely and somewhat puts my bogroll holder / cotton wool snowman from the same age to shame!
Wherever you live there is scope for crafts courses through the Volkshochschule (evening class) e.g. my local one had lots of knitting / sewing / felting etc on offer this year.
if you want to live in a house, you will probably be further out from the centre. And it will be expensive. But then so is London.
I used to live in London and came over to Munich to visit a friend. When I got back to London after a lovely outdoorsy holiday and fab weather and stood on the Finchley Road in the pissing rain waiting for my bus, my heart was aching for the quality of life I had seen in Munich. Now I am back in Bavaria (alas not in Munich - I am slightly jealous) and I know where I would rather be!
Re au pair - yes I know of people with au pairs here, very doable. Also if you DD goes to local school, there will be provision for wrap around care ('Hort') after school and it will also operate in the holidays. For reference purposes, the Hort here costs 160 Euros per month (yes you read that amount right - childcare is much cheaper here!) and kids can stay on in school with supervised homework and other activities until 5pm).
(OK thank you for your thread. I have just talked myself into a better frame of mind after being grumpy about Germany at the start of the week!!)
HTH.