MCward, you most definitely would. I have stayed in houses along that train line and they are easily heard. Some day more than other due to winds. There is a break wall between that helps, but when you're that close it sometimes just doesn't make a difference. Trains do not run all night though. They run frequently in the morning (every 10 min accounting for back and forth) from about 6am to 9am, then from about 3 to 7pm, outside of these times it is around 15 to 20 train passings. You need to realise that the Williamstown line is a short line, so when a train passes in the way through, it will return about 15 minutes later.
That all said though, no matter where you live, you get used to the sounds in the area and they are different everywhere. I live in a lovely location in Footscray that is near a major freight line and when I moved in the sound was very noticeable, but now I dont even notice it. I only notice when visitors come and remind me.
Williamstown is a beautiful place to live and all the amenities are so close. Not to mention the luxury of a beach, city view and many school choices for your family... if you have one.
Obviously the choice is yours, but if I had an opportunity to get into Williasmtown, I'd take it. The competition is already hard enough, regardless of the economy and the state of a real estate sector. It's a long term investment.