My kids are currently 8, 6 and 4, but I started working from home (doing medical transcription) when they were 3, 1 and just a twinkle in my eye.
I worked days while they napped--3 hours in the afternoon--until my youngest was born. Then it was ONLY possible to work at night. However, keep in mind that doing transcription required me to wear headphones and pretty much be unable to monitor or respond to what the kids were doing outside of the office.
I dropped that career and switched to internet marketing in January 2003. By then, my youngest was 3, so I was able to work during the day. I pretty much worked every free moment, taking breaks only to make food, do some hugs, play a quick game, etc. After a couple months I could ease up a bit. I found that working the morning--especially during the summer--was best. Once we hit around 11 a.m., it was impossible to concentrate. There was lunch, kids arriving home from school or neighbors coming over to play, swimming, picnics and outings in the afternoon. So it was either early morning or after the kids were asleep.
Now two are in school and my youngest is independent at 4. I have found that my plan to work at night is not working--I am just way too tired. It's either in the morning or it doesn' t happen at all.
Plan your housework for two days a week, in the afternoon. I do upstairs on Mondays and downstairs on Fridays. Maintenance tasks are done each day to keep it presentable, usually during dinner or lunch cleanup.
I also arranged a car pool/babysitting services with another school family where the mom works part-time. She gets her hours in because I drive two days a week and keep her daughter one afternoon. I get all day Monday to myself because she watches the kids, and don't have to drive two other mornings a week (so I can spend the time in the office).
Finally, when I have really big projects (like making landing pages), I usually go to my parents' house to work. I bring my wireless network and set it up at their house in a jiffy (they also have cable internet). They have an upstairs office with a TV, so I hang out there, while they generally take care of my daughter. Molly can run up to see me and we eat meals together--but I have zero distractions, because I'm not hearing my phone ring or staring at the dust on my end tables!!!
The trick is to identify the best 2-4 hours of your day where you can reasonably say there are no distractions each and every day. That's your work time! Stick to it and you're all set.
Good luck!