We have a room like you described and yes it is the playroom. It is not immediately visible from the front door but as soon as you step past the foyer. We have many friends who use a front room as playroom. I have never thought it trashy or odd. They have small kids - it will not be that way forever. Our plan is to have it become a study as DC grows for homework etc.

You can probably put toys anywhere, you just need attractive, proper storage.

I recommend adult-looking furniture such as storage ottomans with baskets for separating stuff into this or that. Closed cabinetry also helps. Be vigilant about putting toys away every evening, and bring baskets of toys up into kids' rooms when guests come over.

Totally works for us! We have three storage ottomans in our large living room area. A lifesaver. Check out www.overstock.com for excellent deals.