Didn't make the switch, but I can still answer some of your questions. You can be approved as a tax-exempt organization by the IRS without being a corporation. You can be deemed a nonprofit by your state without being a corporation. (Being a nonprofit and being tax exempt are not necessarily the same. One of the better articles I've seen that describes the difference is here:
www.venable.com/publication.cfm?publication_ID=484)
And, generally speaking it will take the IRS anywhere from 6 weeks to 3 months to approve your tax exempt application.
As for incorporation....this is really not a big deal in terms of effort or cost, usually. But there are several benefits. In my state, the initial corporate filing fees are $75. When you file, you file your Articles of Incorporation. The Articles are generally very brief, and set forth things like the name of the corporation, the fact that you will be nonprofit, and that you have bylaws. Your state may even have a "fill in the blanks" type of Articles that could be used. Then, every year, you file another report with the state (in my case, with $25) that lists all the officers and confirms that you are still in existence. You also need to make sure that your bylaws conform to state law. (States usually regulate things like how many days notice you have to give before an annual meeting, what your minimum quorum requirements are--pretty basic stuff like that.)
As for benefits of incorporation, the biggest one is liability protection. As a corporation, your officers and members cannot be held personally liable if the PTO is sued. The other benefit is that it clarifies the fact that the PTO is separate from the school. In the six months or so that I have been reading posts on here, it seems to come up with some alarming frequency that some PTOs can't seem to keep their money and responsibilities separate from the school. Having a well-formed/organized separate legal entity would go a long ways to prevent such problems at the front end.
Finally, if you have a corporate lawyer as a parent, see if you can get him/her to help you out. This is pretty basic stuff to someone like that. Failing that, even a basic consultation with a corporate or nonprofit lawyer may get you steered in the right direction at no or very little cost.
