I am a mother of almost 3, 3 years, 18 months and due any minute :0). Both my girls measured big for my due dates, and both were on the larger size. My 3 year old was 8lb 10oz and my 18 month old was 10lb 8oz. The weight for my 18 month old wasn't so much the issue as the size of her head and shoulders. Her head was acenclitic (spelling),cocked to the side, so she had to be pushed back up in order to straighten her head. After that she progresses well until we got to her shoulders, she had shoulder dystocia (spelling), her shoulders literally stuck and they had to be pulled out by my mid-wife. Her head was 14 1/4 inches and her shoulders were about the same. That having been said, she was delivered vaginally and at home, with no tears. It was by no means an easy birth, but it was doable and both she and I were happy and healthy at the end. We were both exhausted at the end to say the least.
I think the biggest concern would be the fact that your little one is breach. If they can get him to say head down, then I wouldn't worry too much.
In the end even if the labor is hard (which is inevitable with larger babies) and you tear, you will recover more quickly and with less complications even if he gets stuck than you will with a C-section. If you plan to breast feed and you have a C-section, you will be delayed in being able to get started and this will complicate the process or even make it impossible to breast feed at all. Just food for thought.
Hope this helps. Just breath, it is possible to birth BIG babies. It never ceases to amaze me how the female body can stretch the way it does :o).
-M.