Lastly, and this should be the first thing you do before you decide anything, speak with a lawyer and a CPA, and I don't mean the guy who does your taxes at the front of Walmart, make sure they both are truly informed on all of these topics. Good Luck and don't believe everything you read.
I have been in exactly the same situation.
I would like you to consider keeping it as a rental
You are going to want to talk with a CPA about the after tax consequences. I was pretty stressed out initially, but in the long term we kept the property 18 years and made more money than we ever thought possible.
Because the property will become a deduction and an investment, you tax situation will change. Also, depending upon your situation, you may end up having to rent a condo or townhome when you move. We rented a small house, so we lost our homeowner deduction for mortgage interest and property taxes, but those deductions became business expenses, so although we couldn't afford to buy for a couple of years, we did have tax benefits from the rental.
In order to have a short sale you need to be able to prove hardship (meaning you need to be broke) and your credit will be affected, preventing you from being able to qualify to buy a home for quite a while. You might be able to talk the lender into accepting a promissory note for the short sale, but due to the expense of selling real estate (title, escrow, selling commission), it think keeping it as a rental would be the best way to go in most situations.
Talk with a Realtor about the pros and cons of income property.