I work for myself and work exclusively from home (other than for meetings). Working from home, while awesome in many ways, is not a silver bullet either.
1. Working from home does not equal no childcare. We have an au pair who watches the boys while we work. Childcare for us is essential. I have tried to work without childcare and, other than now and again, it is very very hard on all of us, kids and adults alike.
2. I have a big house and dh and I both have our own offices. We have had to give up a bedroom and a downstairs room for office space. I actually share an office with my operations director. Most people do not have the dedicated space we have. We also have a business internet account, VOIP line, laptops, etc. basically some real office infrastructure required in order to work from home. I have a friend who had to give up freelancing/working from home because she couldn't get broadband internet at home and her cell got nasty coverage in her neighborhood. She had no way to communicate with the outside world.
3. While growing, working from home does not (yet) have the respect in most offices. I know that when I tried to organize a work from home schedule with my former boss (which lead to me quitting), he was very dismissive and basically thought I was asking to work part time.
4. There are very few jobs that offer real work from home. Most places let you work one day from home, as a huge treat. Flexible hours means you can come in any time between 8 and 9 and then leave 9 hours later. <sarcasm>Oh the freedom </sarcasm>
5. If you work exclusively or primarily from home (or even off site), it is very easy to lose touch with colleagues, politics, informal decision making, etc that still takes place around the coffee pot or before meetings officially start. We had a deputy director for our project who worked from Boston and she was really out of the loop most of the time (there were also some politics involved too - my boss used her distance as a way to cut her out of a lot of decision making - crazy place).
6. back to kids - frankly, the kids can be very disruptive at times, even with childcare. I was on a conference call yesterday, and my 5 year old decided he wanted to sing at the top of his lungs right outside the office. I had to get off my call and physically move him to another part of the house so I could hear the call.
It was a snow day and the roads dangerous, so he and our au pair and other son were trapped in the house. Most days, they are at preschool in the AM and our au pair takes them to playgrounds, playdates, etc. in the afternoon. So in many ways, we are home, but our kids aren't so what is the point of being home? (other than the fabulous commute).
7. it is MUCH harder to separate home and work when your work is only steps away. I don't get snow days. I don't get real vacations, days off, evenings off, because the email, cell, work is always there. We have to be very self disciplined in turning off the work - much more so than if there were that physical separation of work and home.