Two of my co-workers live within two blocks of the office. It is really convenient for them! One of them had a sick cat recently and was able to check on her every lunch break. The other one has a hard time getting up early, but he can literally roll out of bed and into the shower and be at work 15 minutes later.
I live 3 miles away, close to the public transit route, and sometimes I'll walk. It's pretty convenient most of the time. (Today, when I was weak with pregnancy nausea and didn't want to stand up in a bus, yet they were all very crowded for a while, it took me 45 minutes to get to work.) I have other co-workers who commute an hour or more each way, and I can't imagine putting up with that!
The town where I grew up has an interesting little development built around 1980 that is a full block of closely placed 2-story buildings, with parking around the outer edges. In the buildings are a variety of retail, office, and apartment spaces. There was a lot of skepticism at first, but it's been pretty fully rented all along and still has a variety of stuff in it, and there actually are a few people who both live and work there. It's at the edge of the major strip-mall area, so it's one of the few places in town where you might get along without a car. I keep expecting more blocks of this development to be built adjacent to the first one, but oddly enough it's still open prairie there--enough for 2 or 3 more blocks--for some reason.
As a working parent, of course, you'd want your childcare to be also near your home and work. My son has always been in childcare or school within 1/2 mile of either home or my office. His dad works from home now--which of course is another way to live where you work, if you can stand it. Personally, I like having a separate workplace and leaving my work there.