The landscaping may be worth it if you are going to gain a lot of enjoyment from the greater use of your yards. It will always be a large factor in selling your home but, you may not get all that you put into it back in increased sale price. I just did a pretty major yard redo in the front, taking out the lawn and putting in drought tolerant plants. It looks great, the house has much better curb appeal and there is hardly any weekly maintenance. Be careful how much you spend if you are looking to recoup the money anytime soon.
I agree with your assessment of the neighborhood. With the drought a lot of folks are just letting their yards go. It is a hard choice, I say enjoyment first and then resale vale second.