We recently paid off our debts, and assuming no mortgage, we currently save about 70% of our post-tax income, around $10-12k a month.Would you still highly suggest getting a 203k loan, or would you recommend getting a standard mortgage loan from a lender? 

Lenders are very cautious with this market considering its values.

I find the larger houses are more difficult to find good market rate comparable rents and they will likely attract applicants that bring more wear and tear. 

Yep, its known as a Fix & Flip loan and you can find it on the Lender Finder feature here on BiggerPockets.The term of the loan will generally be less than 2 years and they will usually fund a percentage of the purchase price (I've seen 60-80 percent) and many times 100% of the renovation.It makes sense to have a strong idea of the reno costs prior to applying for any amount with this type of product. 

I obtained a signed pre-approval from a lender for a short-term rental (STR) investment at 80% LTV.

It's a fine balance between economy and what you would do for oneself, but creating a space that feels like home should be of primary focus.If you're looking for some insight into re-leveraging any investment properties for capital improvements, furnishings, etc, some lenders can utilize AirDnA projections to qualify. 

One example we used for our kids that was probably the most eye opening was, we compared our house to our neighbors - we built our house 10+ years ago and told our kids if we did not do what we did 10 years ago, we would only be able to afford the home next door.

The next steps will involve accurate construction cost estimates by a licensed contractor (or two) and connecting with a lender (possibly current local bank) for construction financing.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Its a little rough right now but a lot of positive generally in terms of proximity to downtown and value compared to other parts of Atlanta.