The smallest room we have (about 2m x 3m), which has a desk (couple of monitors, desktop, etc), a view, a door, a small rack (nothing particularly noisy), couple of cupboards, printer, and a pull down single bed for when mother-in-law stays the night.
So much more productive than if I go into an office and try to work, or try to work from a cafe or train. About the only time I come close to the level of productivity at home is when I have a specific task to do, and I'm on a plane with a decent amount of space and power, on a day flight (say an 11AM flight from Europe to the U.S, or a 9AM flight from India to Europe, with the window up)
An old friend has an even smaller setup, he put up a plywood wall at the end of his utility room, about 1.5m by 2m, and it's great. He has a whiteboard and stuff in view of the webcam for group design sessions.
Before we had kids, working from the kitchen table was fine too -- but I agree if you've got kids running around having a dedicated room does the trick.
I've seen a couple of people saying something along the lines of:
people tend to treat you as if you are "at home" rather than "at work".