It can work just fine. Our 1st was 18 months when the 2nd was born. Baby slept in our room until about 6 months. We then tucked his crib in the study for a couple more months, and moved them in together when toddler was about 26 months and baby was 8 months. Before that I was concerned that our toddler might throw a pillow or stuffed toy into the baby's crib. Baby goes to bed at 7:30, toddler at 9. Yes, it's late, I tweaked their sleep times to coincide better with my work schedule. If baby cries (which isn't often, he STTN at 4 months, but teething will occasionally wake him up), we go get him. Toddler stays soundly asleep.
The amazingly awesome thing is that when they wake up in the morning around 8:30, there's no crying. I hear them start jabbering at each other and playing with toys, and I know I have about 30 minutes to ease myself awake. On rare occasion they'll play at bedtime, which we ignore. It'll get loud, toys will be flung about, but then they both settle down and fall asleep.