Have you considered using attribute tags to indicate whether people want Household or Individual envelopes? That may result in needing to generate multiple Envelope Lists, but could be useful for these scenarios. You may also want to check with our Report department through a support ticket. They may have some creative ideas on how to accomplish what you're trying to do.
I don't know who you're using for Envelope processing, but would they work with you to perhaps do a some of the processing? e.g. If John and Mary Smith both have Envelope #254, combine their names. Children could be given their own envelope numbers. If you're pulling the list into Excel, you could probably program some macros or write some formulas to generate the envelope names and numbers. I'm not an Excel expert, but I think it can be done with a little trial and error. I know that if your Envelope Processor uses a database back-end, they should be able to write some code to do combinations such as the above, but it may come at a cost for them to write the code.
In Him,
-Peter Schott