It is normal that your refund decreased when you add your file 1099-MISC. Income reported on a form 1099-MISC is self-employment income which is subject to self-employment tax of 15.3% in addition to income tax. Moreover, there is generally no tax withheld on a form 1099-MISC which further reduces your refund.
This said, you should still file jointly as most couples find it more beneficial to file jointly. Filing separately subjects you to higher rates and will make you ineligible for a number of tax credits such as the Earned Income Tax credit.
Please read this TurboTax FAQ for more information:
The above answer is correct as to the explanation of why your refund went down
Furthermore you should (almost certainly) not file as Married filing separately (MFS). Nothing you described warrants MFS. Her income will be taxed the same way MFS, and your income will be taxed at a higher rate than MFJ. But the only way to be sure is prepare returns both ways and compare.
That's more easily done with desktop software than with on line. Try this tool: <a rel="nofollow" target="_blank" href="https://turbotax.intuit.com/tax-tools/calculators/taxcaster/?s=1">https://turbotax.intuit.com/tax-tools/calculators/taxcaster/?s=1</a>