Good additional input. You might also consider suggesting bringing a home inspector along for a quick evaluation of the more technical conditions of the house to factor into the equation.
I noticed your zip code as 49506 - are you in EGR or outside of EGR? I live and work in EGR and believe me the answer to your question really depends on where this home is located. EGR buyers are looking for something like a master suite in their homes. However if the master suite is going to eliminate the bath all together on the 2nd floor you may not want to do this. My experience in selling and buying homes with clients in this area have a lot to do with my answer. However it may not increase the "value" of your home but may make your home more desirable for purchase. It would be best to have a realtor come out and do comps for the area and compare solds and active listings..........for price and condition, then based on this and what you want to get out of the home will help you decide what you should/need to do to sell your home.
There is a LOT that goes into the answer to this question. How long do you plan to stay in the house? What will the project cost? What will be the impact to the value of the property?
It sounds like a big undertaking, so I would advise you consult directly with local contractors and real estate professionals.