Happy to oblige, OP. I was also really worried about this going into our situation - *both* DH and I WAH pretty much full-time and from what you read on some of the nanny boards around here I feared we'd never find anyone at all, and/or that any nanny we got would quickly become irritated by us always being around. But happily it's been no problem at all. We're in a pretty small house, too, and don't have a separate playroom or anything. DH has an office upstairs that you have to pass to get to our toddler's room and he prefers to work with his door open, and my office is off the kitchen and although there's a door between the rooms, there's a window in it (weird, I know, but it came that way with the house and we haven't replaced it yet) so when our nanny and toddler sit at the table we can all stare at each other if we so desire.
Yet it all works just fine. I mean, most of the day we're working, and nanny's working, and we're all doing our own appropriate things and not interfering with one another. I do often run into toddler/nanny when I'm getting lunch or a drink or what have you and it's so nice to be able to give my kid a hug at those times. And when they're playing something fun DH or/or I'll even sometimes come join for a few minutes, like the first time we set up our water table for the season. Our nanny told me she enjoys it, because a) she thinks it's nice for parents to get to see their kids during the day, and b) she gets some occasional adult interaction with us which makes for a nice change now and again. Depending on the phase our DD has been going through, there have been a few occasions where she's been upset to see me or DH and then have us go back to work, but what can you do. It has never bothered our nanny, who takes it all in stride as part of, well, being a nanny. Although I am a shy person and was nervous about having someone in my home, it really is true that she's become part of the family, like a sister or even a mother figure in some ways (she is an older nanny and has raised a lot more kids than I ever will!). I didn't breastfeed but I cannot imagine she would have been anything but supportive if I did so while she was on duty. And while she's really wonderful, I don't think she's unique as a nanny in this way or anything.
So yes, it can work! I also know other families in our neighborhood with situations similar to ours, where one or both parents often work from home while the nanny's there. I think it's becoming much more common, especially around here, so may not seem as odd and therefore uncomfortable to nannies as it used to. I mean, obviously no one wants an employer following them around and breathing down their neck, but those of us who work from home are...working! So it's not like we're interfering with our nanny, and she's definitely in charge when she's here - I would suppose that is the one place where some parents and nannies may get into conflicts.