The radwagon is pretty large for a bus rack, and more importantly it is very heavy to lift. Also, with the caboose, you might not be able to fit it at all, so I would not consider the bus rack to be a real alternative. The caboose should work well with kiddos that age (mine are 5 and 6) but you have to be able to lift the kids into it. Probably not a problem, but something to keep in mind.
Looking at doing this next year with the two kids. Walk to school is only like 15 mins but I think this would be fun and then I can ride the bike to work another 7 or so miles (about 25 mins)
How big is the radwagon? Can it fit on a Bus bike rack (if the weather gets bad) Also I do not think I will get the child seats, thinking of just the caboose. One kid will be 7 1/2 and the other 4. Hows towing 2 kids working out for everyone?