My three kids are 8 and 4 (twins). I took the SAHM path and am considering getting back into the workforce part-time next year. Here's my experience:
I had just gotten a job as a software manager when I got pregnant with my first. I enjoyed my job, and was excited about being a manager (I'd previously been a project lead) but didn't love it. I knew I didn't want to work 50+ hours while sleep deprived, so I decided to stay home. I really enjoyed the first year and a half (join a playgroup of other moms), but around 2 years in I started to get restless. I found a great, part-time work at home gig doing software contracting. I hired a nanny part-time -- I played with my son, did swim lessons, attended mommy-and-me classes, and did playgroup things in the morning, then the nanny fed him lunch, put him down for a nap, and did dishes and laundry while he slept in the afternoon. It was a great arrangement, and I really enjoyed it while it worked. Unfortunately when he was close to 3.5, I started having a lot of conference calls and it was a real struggle to keep him from running into my office. When the nanny left (she was pregnant as well), I switched him to a full-day preschool. As for the job, it was nice to get to concentrate on something for more than 10 minutes at a stretch, but the work itself was really boring and not challenging.
A co-worker of mine also worked part-time for the same contracting firm. She had worked full time at a regular software company after her first was born, but said it was so much harder with two she was ready to crack. Her mother watched her kids, and she hired someone to cook for both families (they from China and apparently the cooking style they prefer is pretty involved), and it was still not workable. She worked part-time for about 2 years, then decided to stay at home full time when her youngest started kindergarten so that she could do more after-school activities with her kids (Chinese school, sports, music practice, etc.)
When I had the twins, I decided to quit working again for a year or two. That has now stretched to 4 years. The twins are now in preschool 12 hours a week. Kindergarten is half day (only 15 hr/wk), and they have fall birthdays, so it will be 2 more years until they are in school full time (28 hr/wk). With pickup/dropoff factored in, it's more like 25 hr/wk that I'll be kid-free.
I had lunch with an old manager, who would be interested in hiring me full time to do software coding (not management, although I would probably be able to work back into it in 2-4 years if I wanted to). The work is not interesting, though, and I'd really prefer to be home with my kids after their school day rather than have them at the boys-n-girls club or with a babysitter. Also listening to his description of all the project politics I'm very glad not to be dealing with those irritations.
I might be able to get the part-time gig with the contracting firm, but again, the work itself is not interesting. Neither option is hugely appealing right now, and if I didn't have those contacts, I would likely need to spend a year taking classes to make my resume look fresh. It would definitely be a struggle to get a job where I didn't have contacts. I'm considering trying my hand at freelance iPad app development, but that's kind of like deciding to be a novelist -- only a rare few hit it big.
The biggest downside is that when I left the workforce, my DH and I were making equal salaries. His raises have increased that by half again, and he has moved up the management ladder to where he is getting significant bonuses and stock options. So I can see very clearly the potential income that I gave up by taking this path. I would struggle to get the salary that I left 8 years ago.
The biggest upside is spending time with my kids, being able to keep my own schedule, and not having an obligation to an employer. My son had a lot of issues at school and I could just be available to deal with it rather than taking time off work. If you stay home, definitely join a playgroup -- it gives you other moms to hang out with.
I've really enjoyed being home for the last 8 years, but am now needing some mental challenge. I still enjoy my kids (most of the time!) but am sick of shopping, laundry, cooking, and tidying the house -- these things would still somehow have to get done even if I went back to work.
I don't really have any answers. It all comes down to personal preference. I wouldn't go back and change the path I took. I'm glad I took the time out of the workforce despite the costs. I do wish it were easier to find part-time work, on-ramps, and job-sharing situations, but the reality is these are somewhat rare.