Hockeyrabbit,
If the Babylock is fine except for the quarter inch seam, IMHO it seems that spending 2k to get a good quarter inch is a bit excessive.
A different presser foot plus a well placed pad of sticky notes should solve your problem and then you'll have 2 grand to spend on fabric.
Just my 2k, I mean 2 cents worth.

For some reason, my dealer told me to stay away from the Quest. She claims they have had a lot of complaints about it.

If you buy a gently used, warranteed Bernina you can get more "Bang for your buck" than if you buy new. The warantees are great and you just can't kill a Bernina.

The Quest Plus has many great reviews. It replaced the Quest, which apparently had issues. But I think any model can have lemons. There's no 99% reliable brand anymore. Dealer support is everything, but it seems many dealers don't bother servicing what they sell. That's why reviews and forums are so important. Prices are also over the place. Just as an example, the MSRP on the BLQP is $2500, but I've read of folks paying $1000-$1900 new w/o trade. Reading reviews saved me hundreds on my machine.

Use masking tape on your throat plate to mark 1/4 inch

I just bought a Husqvarna Viking 875 Quilt in Sept. That's in your price range. Mine doesn't have an embroidery hoop, but I could have gotten it, if I wanted it. I'm able to do 3 alphabets, tho, so I can make my own labels.

I'd say to make a list of all the features you want. Then write down a list of all the questions you have and take that with you shopping. Make sure to also bring fabric the type you'll be sewing on, as well as some quilt sandwiches, to try fmq on the different machines. I didn't like the feel of the Bernina stitch regulator, when I tried it. It felt like I was fighting the machine. There might be some features you don't know exist until you see them. I decided I wanted a scissors feature and use it just about every time and now love it. Before, I thought that was a silly feature to have. The one thing I just love about my machine is the pressure foot raises just a bit when you stop sewing when the needle stays down in the fabric. This allows you to pivot the fabric, if needed. Then when you start sewing again, the pressure foot automatically goes down. It also can rise up extra far if needed for thick fabrics.

All the different brands seem to each have one or more things that other brands don't have, so it's hard to compare them to each other and then also factor in the cost. Bernina are more pricey. Most machines have a 1/4" foot that helps you sew an accurate 1/4" seam. Also being able to adjust the needle right and left many increments is helpful as well. I think mine can go 29 positions.

My machine also has 9 3/4" to the right of the needle. That's a lot of extra space for fmq.

Also, make sure you can get your machine serviced and are there free classes when you purchase a machine? I'm taking my free class in Jan.'11. The first time my schedule and the store's jived, but better to use it for a while, so I really know what I don't know before I take the class.