EngineerDave,
I can empathise with your fear about relocating to an area several hundred miles away, having done it professionally several times myself. However, I can honestly say I've never regretted it. Although each time it's been tough at first, I soon found that I made new friends in the areas I moved to. I also had new experiences that I would never have had, if I had stayed in my home town (most of them good!). If you don't like it, you can always move again, but you would be well advised NOT to stay at home and hope something comes up. You're far more likely to be able to find something you want to do back home after your first few years experience. If nothing else, think of it as a two to three year working holiday!
As for the salary situation, in my experience, the annual salary increases are larger in large companies than in small ones, as you become more valuable to them. This is especially true with your first job in a new field. The larger companies often have other candidates who they believe will be almost as good, and this might be the reason why they haven't upped their offer. This is especially true if they're taking on several people at your level.
Once you prove how good you are, a good company will compensate for that - whether it be with salary or other benefits. If they don't, there's nothing to stop you looking elsewhere later on.
One last thing - negotiation doesn't start and stop with salary. They may not be flexible on this, but you might be able to get somewhere on other items, such as vacations, health insurance, pension, relocation assistance etc. etc. For example, you say it's a more expensive area to move to, so can they help you with rent/house purchase etc.? Your book should help you with this.
