I have a decent down payment saved, and don't want to miss out on an opportunity to invest in property while the interest rates are so low.

If they only provided you with a Zoning Analysis of the lot and that shows you can only have 2 units Legally, there is still a good shot this will be permitted to remain as a Non-conforming 4-unit building.I sent you a PM so you can send over the documents you received (Since I didn't see anything attached to your post).

But in my head, it makes sense to shoot my shot with a slightly lower offer on all those houses and see if I can get lucky.

Is it worth trying to squeeze another small bedroom into it, it has decent space, but would still be a smaller bedroom.

Transfer that equity into a nice stable C or B class multi family in a decent midwestern city.

I usually buy properties that are not making decent profit or none at all due to below market rents, most times TLC fixes this issue(Paint, light fixture, faucets).

I manage my own rentals in both collier and lee county but if you ever find a decent PM down here that is actually affordable let me know :)

Credit scores in the high 700s no significant debt and decent income.What would you do and why?

Good decent tenants? 

That means if one issue happens your going to have to do a pocket shot and like you said if you do not have a lot of capital that issue can take you down.