I've never cared for bluring using Photoshop unless a lot of time is spent with the magic wand tool and it's done in steps, getting more blury the further back you go. It's easier and more pleasing to my eye to just use a wide aperture. I do like the idea of bluring out the background, as I think it distracts from the subject, just not with a coarse blur or a fade. An aperture of 3.5 would have worked nice, I think. I do like having the other people in the image, but they don't need to be sharp for it to work for me.
I also would like to see it in a more natural state, just to know what you are starting from. The tone in the second one is interesting, but I think a little too far. Perhaps something in between?
I think you've captured a nice moment. Good job!