This is an interesting predicament. I went through that several years ago. I went with the smaller frame and I adjusted the saddle all the back in the seat clamp then rolled/turned the handlebars forward slightly to give a little more reach in front. The seat post was kept awkwardly high compared to the look of the frame, but my legs and feet were where they should be on the pedals. Thats all I could do back then. You could try that, and might give you little breathing room. Or maybe if there is a longer stem you could use. It was along time ago for me before all the parts that are available now.
But I have to say that either way that sounds and looks like some monster wheels on such a small frame. I still and will continue to ride 26″.