You have to do the raw processing FIRST, before you start any Photoshop work!
Why did you make the merge so complicated? Why not just put the two of you on the right of the kids?
Next, I need you to post two photos for me. One big example and one small example.
Then also post 100% crops from each photo. https://damiensymonds.net/2013/09/grabbing-700x700px-100-crop.html
You have to understand that smaller jpeg file size is often a GOOD thing, not a bad thing.
https://www.damiensymonds.net/2015/08/about-jpeg-file-size.html
Well, start here: https://www.damiensymonds.net/2010/05/best-practice-for-web-photos.html
I think you think this is more complicated than it really is.
Just resize using Image Size, then sharpen and save.