Main level - no doubt. DH and I just moved to a single story mid fifties ranch. We are going to remodel (I grew up in one of these and didn't realize how little closet/storage space there was!) He retired and was starting to have knee issues. I wasn't, but now the first few times I go up a flight of stairs I think my arms get a better workout than my legs. But I would definitely put the loft in for the grandkids AND for as long as you can, go upstairs once or twice a day - just because you can and you want to keep it that way. I sometimes go for weeks without climbing stairs because no place I go has them - rural Sonoma is a single story world. On the guest room aspect. If you have enough space a queen sized wallbed, when chosen for a flat front, can make a really nice design wall. You can take it down if you have guests.