I grew up in a small town; population about 600. I know live in a city; population about 3 million o.O
I think that raising a family in a small town is best. I would argue that it is a safer environment, that the schooling is better (due to small class sizes), and that it is more hospitable due to everyone knowing everyone.
Someone mentioned the gossip of a small town, which is true, but in my experience has never been anything to dramatic, and in a small town, everyone generally realizes that it is just gossip.
Don't get me wrong, I love the city, but in a town the size of mine, if your kid gets drugs from someone, you already know who it is! Gangs are non-existent and the cops have nothing better to do than pick up everyone for the pettiest of crimes.
Also, there is the fact that your kids can enjoy nature! So many people go through life without even leaving the cities, which truly is a shame, because nature is so much better than anything man-made! Gotta love camping in the snow...