COLORADO

1) Good public schools for our son - Yes
2) Great biking - YES
3) Progressive, functional politics/city + state management - Denver and Boulder for you. Colorado Springs would scare you.
4) Great scenery - YES
5) Great weather - Winter for 4 months, but the other 8 months make up for it :-)
6) Hot is good, cold would have to have awesome Springs & Summers - Yup
7) Affordable cost of living - One of the best
8) Friendly people - You bet

Even better on paper is Salt Lake City, but I'm guessing that the progressive thing would prevent you from moving there. Colorado is good stuff.