Short sale vs foreclosure

[Gophernut]

My wife and I have unfortunately separated. Not my idea, but not much I can do about it. My question is this. Neither of us can afford to live in the house we have had for the past 8 years. We owe more on it than the current market value. I need some solid info on what the implications are for each of these. What happens to the balance after a short sale? What are the tax ramifications after wards? Foreclosure seems like a really negative thing, and I really don't want to walk away from the house and let it go back to the bank. Getting roommates is not a plausible answer, and I don't know that it would be able to be rented out in order to keep it and allow for a market recovery or a change of heart from my wife. Any advice would be greatly appreciated. We are current on our mortgage and bills, but with the income basically being slashed in two, neither of us can do it. We are not leeches, and don't want to ruin our credit, but what are our options?
Thanks