I don't think the amount on the pre-qualification letter should have much bearing on the buyer's response to your offer, although I can see why you think it might. Giving them a letter that just matches your "lowish" offer might actually backfire and make them think you won't be able to close the deal since it's tight.

I probably wouldn't hand in my highest letter, but giving some breathing room would probably make them more comfortable, and you can still stand your ground at the negotiating table. Much better than giving the seller the impression it's a "take-it-or-leave-it" offer that they just might end up leaving. Either way, the letter will give them the assurance that they can close when you say and that they won't be left another month with a mortgage payment over their heads...

Are they requiring you to show the pre-qual letter? Or do they just want to be sure you are prequalified?

Since you are dealing with a bank, I don't feel emotions are a real issue. Go with the lower one, but don't hesitate to pull your rabbit out of your hat when the time comes.

Hope things go well for you, I know you guys are excited and nervous at the same time. Keep us posted on how it goes.