My house is a 2 BR/2 BA with a small attached single garage. We don't use the garage for parking because the approach is awkward. I could convert the garage into a 1 BR/1BA suite. What might be more attractive to a buyer, a 3 BR/3BA house with no garage, or keep the garage and pave the access?
Although it can be difficult to decide how to best spend your money when remodeling your home for sale, keep in mind that it is almost impossible to guess exactly what amenities a potential buyer of your house may ultimately find desirable. Most likely there are some potential buyers of your home who would want the garage, while I'm sure others would see the benefit of having the extra bedroom and bathroom.
In situations like yours, I think it is best to let the home and surrounding property dictate the eventual design of the remodel. For example, if you find that using that the existing garage is awkward and inconvenient, then chances are the next buyer will as well. Conversely, it's never a good idea to try to make an existing structure into something that it was never designed to be. What you should strive for when remodeling your home is an overall picture that makes sense to a first time visitor. (Many real estate agents will tell you that home buyers often make a subconscious yes/no decision within the first few minutes of previewing a property.)
Although I have not seen your home, my gut reaction to your dilemma is that you should consider converting the existing garage into an additional bedroom and bath. As is, the garage is not being used for vehicles because of the awkward approach, which means that potential buyers who are expecting a usable garage (because of the MLS data sheet their Realtor provides) could feel let down when they actually visit the property. Yet, if your 3 BR/3BA home is listed for sale with no garage, then potential buyers who do visit your home won't be expecting any garage at all. Likewise, a new bedroom/bathroom suite could expand your pool of potential buyers to include families or a single person or couple who might want a home office or a guest room.
Before making your final decision, you should review your local zoning regulations and building codes to make sure that any new design will be acceptable to the building department. I would also have a builder or draftsman draw up some simple floor plans and elevations of your potential remodel so that you can review them and make sure that the new bedroom design fits harmoniously with your existing floor plan.