For the birth of my third, my just-turned-3yo and 4.5yo were sitting on the couch, about two feet away from my own feet.
It was actually my 3yo's idea that this be a waterbirth. He was quite insistent, actually, that 'baby come out in a water'. He was quite horrified to see any other type of birth, when we played a couple of videos to familiarize the kids with the process. I hadn't seriously considered waterbirth until he was so insistent that this was how I was going to have this baby - it made me re-examine my thoughts about it, and my midwife made it so easy to have a waterbirth (provided the pool, the pumps, the hoses, did all the work...)
For a while at the very end of my pregnancy, any time I'd get into the tub the kids would ask me excitedly if the baby was ready to come out yet. But they never had an interest in being in the water with me, they were just very excited about being able to see the baby being born. In fact they needed much reassurance that I would make sure they were there. At the time of the birth, it was the middle of the night but we woke them up and set them up on the couch, and they were excited enough and happy enough to stay awake and alert through the birth and about 2 hours of baby-time afterwards.
We ended up not calling anyone to help out with the kids - but we were prepared to call up MIL if they seemed to be having trouble dealing with anything (or we were having trouble with them) - she lives less than 10 min away. It was so quiet and peaceful, and the kids were so calm and balanced about the whole thing, that we didn't call anyone. It was great that it was just our little family and the midwives.
But keep in mind that what happened to us was kind of a best-case scenario - happy, excited but calm kids, easy delivery, calm environment. I'm all for having kids at births, but if mine seemed unprepared mentally or if I thought that I was going to traumatize them (or DH made that call during labor), we would have called on my MIL to take them elsewhere and help them out.