Title of the thread should be:
Coalescence | Coalescence / Common Ancestor | Common Ancestor
This seems too easily splashable into Rainbow decks and just adds to potential damage. I'd make both cost it cost 3|4 respectively and have the unupgraded generate 1|1 and the upgraded generate 2|2. But that's my two .
Yeah, I originally had the title as you said, but I opted to shorten it as the card upgrade names didn't change. At any rate, updated to avoid confusion.
As for balancing, I think I like your idea better. I didn't want to make it too cost heavy, but honestly, it never occurred to me to lower the un-upped Ancestor to a 1|1 (I kept thinking of bringing the upped version to a 3|3 - your way makes more sense). I'm still a little unsure of the balancing for the costs, though.