Ray-It seems your in a position to make a change (I wish I had this problem). Is there any way you can rebuild your garage by adding another level to it? This would help with the extra room to set up your machines and build a large cutting area which could double as the work in progress section. Leather storage I've solved by building overhead storage with lighting mounted under it. An apprentice fresh out of school(cheap) that would want to learn the trade isn't a bad idea. You get some help and they get some experience.
" I could get a 'store-front' and use the space to create a great workshop with a small retail capability." this also sounds like a good idea if something is available around your area. Although with working out of your home your saving money, and have a tax write off. If you hire a trainee, I think you'll get your money's worth out of them by saving your time for more productive things. I've been laid up with 3 shoulder surgeries this past year, and will be returning to work on Aug 9th. Haven't been able to do any leather work at all for the past year. By this time I was hoping to have an on line business going, but will have to work on it this coming year. I also work out of a spare bedroom that is to small for me. Maybe in a year or two I'll have a problem like you have, but till then I continue to struggle with limited work space. I hope you find a solution that works out for you.
charlie