Ahhh, the age-old question. To me, it really only seems fair for those to weigh-in who have DONE both!
And we have. We were on-site diehard fans, until we had a child and MIL who wanted to go, and grandparents. So, we rented a house last year. Our son was 16 months old. We had no desire to stay in a hotel room with him since he goes to bed at 7 pm. We loved the house.
And it's not that far from Disney. And with a small child, who wants to wait 30-45 minutes for a bus. I guarantee we could beat those people back to our house who were waiting on buses to go back to their resort.
But you asked about the $$. it's definitely going to be cheaper for you to stay off-site in a house with that size group. Simply price it both ways and see. You will be able to enjoy some meals/snacks in your home, and have the advantage of eating offsite much cheaper than the dining plan or eating onsite.
Onsite is about "disney magic" and "convenience" for many people. I'm sure when our son is old enough to appreciate the "disney magic" aspect, we would stay onsite, but for now, with the size of our traveling group, we'll rent houses!