I take it moving closer to work is not an option?
I would say, explore the idea of moving before making a firm decision. Have your house appraised (if that's the right word), ask a real estate agent what the chances would be of selling it for a price that reflects the improvements you put in, look around for new housing and see if there's a bargain-priced house closer to work. Doing this without firmly deciding gives you the chance to look without feeling like you MUST make it succeed. Once you know the possibilities, you can decide better.
Living with crappy neighbors is the worse. Sure you can ignore them or stay out of their way, but do you want to put up with their noise, smoking, partying, visitors at all hours or whatever it is that bothers you? You want more than a house, you want a neighborhood where you're a happy part of the community.
The dog is gone. It may be buried there, but visiting a grave is not the same as having a dog. Let that not be a deciding factor.