It depends on when you want to sew and how much stuff you have. I would divide the room with 3 shelf units or cube cubbies back to back. some for you and some for kids toys with a baby gate or half door at the end of shelves to keep kids out of your stuff. Scissors and rotary cutters on peg boards above your work station. I have my fabric folded and stored in elfa drawers with plastic liners (the shorter ones) with a top on it. two 3 rung drawers and one 1 rung drawer holds larger hunks of fabric and thread and fusible web in top drawer. The other has three 2 rung drawers and one 1 rung drawer. The larger drawers hold my fat quarters and other is currently empty but could hold rulers/templates etc. I also have a couple of tall white cabinets with doors. Add a cheap hook latch up high to keep dangerous things hidden a another step away from the children. If you don't really intend to sew when the kids are awake, I would choose the basement if you can keep them away. It won't need to be as clean or organized and you can leave your projects out for those short 20 minute naptime getaways.