I was just wondering if there is a large difference in claiming my wife (alien nonresident) and getting an ITIN rather than just claiming single?

Filing status is one of the first things listed on your tax return. Making sure you indicate the proper filing status is your first step in filing an accurate return. Actually you are not single, so claiming yourself as single for tax purposes is not correct.Once your spouse gets ITIN by filing her W7 Form, then as a resident alien, she is generally taxed in the same way as U.S. citizens. This means that her( and your) worldwide income is subject to U.S. tax and must be reported on your U.S. tax return. Both you and your spouse are liaible for taxes on US source and your world wide income. As you can see, as married taxpaers, you and your spouse file return either as MFJ or MFS. Income of resident aliens is subject to the graduated tax rates that apply to U.S. citizens.

Thank you for the good info. I have one more thing to ask. If my wife is a housewife to our two kids and has no income whatsoever. Would she still need to file?

" If my wife is a housewife to our two kids and has no income whatsoever. Would she still need to file? "---->I assume that your wife doesn't live in the US. Then as married person , your spouse( as she gets her ITIN by filing her W7) can file her return as a joint tax return , either as MFJ or MFS, regardlss of her income. Your spouse is considered married if she is legally married on the last day of the year of 2010( on Dec. 31st 2010). You can't claim your spouse as your dependent; spouses are not dependentsTo file jointly, both you and your spouse must agree to file a joint tax return, and both must sign the return. However, you can't claim your two kids(if both of them live overseas UNLESS they livie in Canada or Mexico ) as your dependents as they do not live with you fo rmore than half of the year.
Though your spouse doesn't get her ITIN, you can file your tax form by mail, filing MFS. Put your wife's name on the form and you need to state "non-resident alien; no SSN/ITIN required" where her SSN would normally be.
Your taxation rate is actually the same as SINGLE, so there will be no difference in the amount of taxes due. If you filed as SINGLE status, it is not correct( as you are married) but since no additional would be due to the IRS, you do not need to pay tax to the IRS.

My situation is like this. We are living in South Korea because I'm in the US Air Force so our kids are here with us. I can just file MFJ and attach the w-7 with it.

" We are living in South Korea because I'm in the US Air Force so our kids are here with us. I can just file MFJ and attach the w-7 with it. "--> I see what you mean. You can go ahead and file your return as MFJ as you said. You only need the ITIN for your spouse if you want to claim the personal exemption of $3650 for 2010 for her.

Cool, I think I have everything complete, I just need to get my wife's info in there. Since she doesn't have an ITIN or SSN how can i complete this field. I'm trying to fill it in online and then send it via snail mail.

" how can i complete this field. I'm trying to fill it in online and then send it via snail mail?"-----> Ok now, I clearly understand your situation; as your spouse is a nonresident alien, you should file either a MFJ or MFS return, your spouse must have either a Social Security Number or an Individual Taxpayer Identification Number. To get an SSN for your spouse, apply at a social security office or US consulate in S.Korea. You must complete Form SS-5.You must also provide original or certified copies of documents to verify your spouse's age, identity or etc.
if your spouse is not eligible to get an SSN( I don't think so , but I am not sure), then she can file Form W-7 with the IRS to apply for her ITIN. In most circumstances, you must submit the Form W-7 with your annual income tax return. Form W-7 submitted without the tax return is routinely rejected by the IRS unless you can show a pressing need for the ITIN. As the W-7 is for your spouse, she must sign it. If it is for your child, you sign the Form as the delegate.
You need send the notarized copy of W-7 to the IRS.
IRS Mailing Address:
Internal Revenue Service
ITIN Operation
PO Box 149342
Austin, TX 78714-9392

However, as said above, if your wife is eligible for an SSN, then she CANNOT( doesn't need to) get an ITIN; she MUST get an SSN.
+++ +++ I guess TurboTax does not allow to efile if one chooses not to enter SSN info for spouse (married filing seperately). But you can use it to complete the preparation and take printout to file by mail.

Please visit the website for FORM W7 here;
http://www.sup.org/authors/forms/W7.pdf
Taxpayer Identification Numbers (TIN)
U.S. Citizens and Resident Aliens Abroad - Nonresident Alien Spouse