I loved the convenience of having a live-in nanny, but I hated the lack of privacy. I think it depends on your personality.
I like to come home and get my jammies on right after work (or at least sweat pants - I wear a business suit all day). Sometimes we eat in front of the tv. Sometimes I lose my patience when my 2 yo takes his diaper off and gets poop on the walls (ok, this happened once...). Sometimes I throw the kids clothes on the stairs rather than taking them up to the laundry right away. Sometimes I sneak a 2nd helping of dinner or dessert. Sometimes I like to gossip on the phone with my sister. Sometimes I let the kids watch tv while I go on Mothering.com.
I just felt like with a nanny living in the house, I had to be "super mom" and not do these things, when in reality, I'm so not.
Our nanny was very discreet, she had her own room but on our bedroom level. I just felt like she could hear everything I did even after she finished work and went upstairs. I used to feel a huge sense of relief, (like I could relax and be myself) when she would go out some evenings. I also felt like I wanted to treat her a little like a guest, (i.e. offer to make her tea if I was having some in the evening and she came downstairs, always asking if she had enough dinner, etc.) but also uncomfortable if she tried to wait on me, (she would offer to make the tea). I just hated going through that every night - it was like having a guest every night, but not one I was really comfortable with to be myself as I always had in mind that I am her employer, and I never wanted it to get "too friendly".
So all in all, I couldn't WAIT to get my house back when we decided to let her go (we let her go for other reasons which are covered in other posts so I won't go in to that here).
I did find it to be a real loss of privacy, but I'm a very private person and her bedroom was near ours.
I have friends who have nanny's with rooms in the basement and do not have this feeling. I think it depends on your nanny and how well you get along, (I saw her as an employee, not a friend, which sure made it - not easy - but easier when we had to let her go).
But it was a lifesaver and worth it when I was busy at work! So there are trade offs...