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Toe overlap is one of those things you learn to deal with. You'll only crash once before you learn how to avoid it. Not a big deal.
the 26" will allow you to mount fatter tires on balance if you're some kind of masochist. Although I'm in the process of settin up my 56cm 700C LHT with 29x2.0 Schwalbe Fat Franks AND V-O 52mm Zeppelin fenders and there appears to be ample room.