I put in for a separation with no reserve job or civilian job in hand (leap of faith). I was due to be in my AEF bucket right after my ADSC expires and figured I better get out while the hiring is picking up rather than risk sitting out of the game on a deployment. It's worked out for me, but was tremendously stressful for the last 4 months (no kidding the most stressful time of my life). Make sure your wife is on board and understands the sacrifices of first year pay and that you might not get hired. If you end up taking a leap of faith have a backup plan to feed your family and a backup plan for your backup plan. I was networking like crazy for both flying and non flying employment.
As for trying to stay in until you get the job offer. It's probably possible, though not with every airline. United seems to be hiring pretty far out, but not AA/US Airways, SWA, not sure about Delta. When I put in for separation I thought that I had to give six months notice, but I've heard conflicting info on that since then.
As for applying, by all means apply now, put your earliest availability on the app and keep updating it. Also get all of your queep sorted out (transcripts, FCC permit, first class medical, passport, drivers record, Recs, sort through your log books).
PM me for specifics