So many awesome things here that I never even thought about. I read all the posts and I really appreciated all of the comments!
To offer more details
1) RE: 401k loan. I took one of these out (10,000) when I bought my house. I was able to maintain my lifestyle (I am frugal, if not flat out cheap, thanks Dad!) while paying back that loan, which I completed about 1 year ago. I completely didn't even think about this as an option again.
2) My father-in-law is an extremely hard worker and, right next to my dad, someone I admire very much in that department. My wife is 100% behind the idea of taking out the money from the 401k. However, that has more to do with her loving her father very very much and less to do with whether it is business savvy; she relies on me for that.
3) I am expecting a partnership (something around 50/50 or 45/55 favoring him) on this business venture and I was viewing it as exactly what it is, an investment. That being said, when it comes time to coughing up the money, there will be some long discussions with him about how we can make this work and what the plans are on this. I don't expect him to pay me back the money at all; thus the partnership.
4) RE: Business loan. Never even considered one of these. I know nothing of them and will need to do research to find out more.
5) Any thoughts on doing a house mortgage loan? I bought my house on a short sale for 99,000 and it is valued around 155,000. I owe about 65 on it now. Are these loans dangerous, financially speaking?