It's a tough decision either way... Based on what you are reporting, it seems to be a common problem applicants often face... I think the decision point should depend upon what you are seeking from a PhD program... At the end of the day, it is your doctoral training and you should approach it in the perspective of which is the better path to help you towards you own individual goals ...
It may be the case that school 1 can give you more funding, more time for research, and because they may not be ""brand name", the faculty may work with you more closely to get you involved (if they are really trying to build the program up). However, as you mentioned, the faculty are not publishing in the top tier journals of your field, which may suggest that they either don't value/reward top tier publications (more than lesser journals) and/or they simply don't have the training/experience to do so. So, the key here (based on what you have described) is that school one may provide you with more latitude in terms of time for research, more funding, and potential to work more closely with faculty (i'm not sure if this is really the case, but it may be). If you value these advantages more, then this may be the school for you.
The 2nd school, which you don't give much more detail about but says its got more of the things that are "cons" at school one,. these would be advantages of the program it self. Whether or not these advantages translate to YOU directly as a student may or may not always happen. Of course, more 'reputable' schools can recruit the 'better' applicants, but students often end up competing for resources, to get on research projects, and faculty time. Faculty at more 'visible' schools have more demands on their time that are not related to research, which would then take away time that you, as a doctoral student, could get with them. The other issue is teaching upon entering.. teaching is a common way for programs to provide funding to phd students (and a cheap way for them to cover courses). However, you probably are underestimating the amount of time required to teach a course each semester. It would definitely take away from your time to do research and your own coursework. Is it important that you obtain some teaching experience? Sure. I would even stretch it to say that if you come in teaching, it may be viewed that you are a student who they can fund through teaching for the rest of your time in the program, which may put you at a serious disadvantages... So, in short, in order for all the things that are advantages of school 2 (compared to school 1) to translate to you, there are several things that need to fall into place for you to ideally benefit from them. If the reputation of school 2 (and its faculty) are so much greater than school one's, and you value the brand reputation, then this may be the choice for you.
Again, there's never a definitive yes/no decision for any of these choices. You know the details about each school better, and (if you interviewed) have a better feel for the culture and what you will experience as a student. Also, your own values and goals will be indicative of your feelings of 'fit' with the program. Remember, doctoral training is half a decade for most individuals, so it is definitely a long-term commitment on both sides.
Best of luck with your decision,