From my experience in working from home, a great deal depends on the environment.
i've worked from home in a number of residences and some were fine, the last was horrible:
i worked for several months out of an apartment, with a separate "office" space etc. The wife was out working all day, no kids to worry about. But... Nothing changed the fact that i lived in a cramped, homogenized apartment super-complex designed to be a bedroom community and nothing else. Even with daily walks in the sun and random excursions, the situation was not good. i was going stir crazy from the lack of variety and open space and had to commute.
(The separate workspace idea as described by Josh and Dave is a must!)