Little to add to this, other than i've recently done some 300ft turnbacks in gliders - with a cross downwind landing there's no way i'd want to attempt it in an aircraft with even more marginal performance, let alone a PA38 deficient some horses.
If you've got "some" power - use it. Another couple of hundred feet might have made a turnback more of a feasible option (As a point of note, way back in time on the RAF G115 Tutors solo students were prohibited from turning back and instructors limits were 500ft (possibly 800ft - the memory fades). And even then i'd probably have taken a punt on using the extra height to try and A) sort the problem B) position for a decent field.
Glad to hear the passengers are on the mend.