We have never lived near my parents. When the kids were born, we were 6 hours away, we moved a bit further so 7 hours away and then they retired and now 9 hours away. We see them a lot. We go visit, they come visit, we e-mail, we talk on the phone a lot. I don't think my children are missing out on anything. Most of their friends are in the same boat since we are in a military town. Most people do not have family nearby.
My inlaws used to be 10 hours away, then 12 hours away and now 30 minutes away. (They moved closer.) We see them more often, but, obviously, shorter visits, which works out better for us. My children are not any closer to them because they are closer. In fact, our children prefer my parents just because they are more the traditional grandparent types than my inlaws. My inlaws, I am discovering, sort of scare my children. I have only recently discovered this and do not know what to do to make it better.
Growing up, we lived across the country from our family for a good portion. (We lived in Los Angeles and my grandparents lived in Florida and Tennessee so we were really far, but we were very close with them, too.)
So, moral to my story: Distance is not that big of a deal if you are good at keeping in contact with the grandparents.