L1B to H1 : Need your advice

[techsmith]

I am on L1B since Jan 2008 and, have a valid extension till Aug 2012 with indian employer A on project with Client X.
Since my employer A is exiting from the project contract in Jul 2011, Client X wants me to remain on that project and has proposed to assist me, change my status to H1B with another employer B (consultancy firm).
Need your advice in making this descison:

1. Should I say YES to Client X. What could be the legal/hidden issues I may face from employer A in terms of L1 to H1B change.
2. What typical issues I may face if, employeer B keeps H1B effective date as some future date (2 months ahead of July), just to cover up for notice period from employer A.
3. Will it be absolutely necessary to travel back to India and re-enter with a valid H1B stamped (if petition approved), so that my stay in US is NOT illegal.
4. Most Important, Is it worth taking this step, considering my wife is pregenant and due in july 2011.

Note: I am NOT frustrated with employer A (L1B), but moving on to H1B with employer B, would help me financially to an extent & I may have a chance to apply for GC.

[txh1b]

1. Only you will know about any non compete.
2. No issues. How can you be sure H1b will be approved by then?
3. Read about COS. Not required unless something gets messed up.
4. Only you can evaluate . It really depends on how good B is.