I just flew with my cat with AC, in the cabin for a 7 hour flight about a month ago. I moved for a job position from Ontario to BC. Remember the carrier restrictions are just guidelines. If you go with a soft carrier you can be a bit over with restrictions cause you can squish it down a little. The height restrictions for a soft carrier is 10.5, my height was between 11-11.5. And i didn't have a problem with boarding. They didn't even say anything. As for the animal being able to sit up..well that is impossible lol. As long as the animals can move and change lying down positions, you should be fine. My cat was cozy in her carrier, but she could change positions.
I honeslty would not fly with my pet in cargo. Its more terrifying for the animal. Its not heated, and they are right beside the engine..so its extremely loud. At least with them being with you in the cabin, you are still able to talk to them and they can still see you. They won't seem so alone. My cat was was super quiet and didn't make a sound. No one even noticed i can a cat with me lol, until i started to talk to her.
here is the carrier i used for my cat. Oh and my cat is a fatty...her with carrier was 20Ibs and i know with AC the max weight is 22Ibs