I moved to Warragul when I was 15 from down past Bairnsdale. Personally I loved it as we moved from a 20 acre property into the township of Warragul and I had neighbours!!! I'm not sure of your background, but country living isn't for everyone. I still like going back down there for weekends, (I moved to Melbourne for Uni quite some time ago) and it is easy to get to Melbourne if you need to go shopping or see a show or something. I wouldn't say the cost of living is really any cheaper as far as food and utilities go. Rates are slightly cheaper than Melbourne. You will notice a big difference in car/house insurance too. Not too sure of schools in Traralgon, but like any school you will get a mix of people - I think that in Melbourne you are more likely to get the lower socio-economic groups in the public system but this isn't so much the case in the country.
Good luck with your decision