We have 3 kids - 5, 3, 1, - all boys.
We really screwed ourselves over by co-sleeping with our first two when they were infants, so I can't directly advise on the 2-child circumstance.
That being said, the older two (surprise, surprise) absolutely loathed the crib. Our oldest was sleeping in a 'normal' bed at 16 months, and our middle was in a 'normal' bed by 18 months - both in the same room. They got along well enough and for a while even slept together in the same bed to keep each other company. They both sleep in their own beds now and don't cuddle with each other anymore but love being in the same room together.
Our youngest, though, spent his first ~6 months in our room. One of the things we really couldn't plan for is how fond the older boys were going to be towards their brother, and how sensitive they would be to the inevitable midnight wakeups. So, to mitigate any negative things (i.e. oldest trying to fetch the infant out of the crib) we kept the baby in our room until we were all well-accustomed to the new person and the change in the sleep schedules. I think we were already so used to having kids in bed that having the baby in a crib in the room was a direct upgrade over the other kids, and much easier to handle.
At 6 months we moved him into his own room (adjacent to the older boys' [we have 3 bedrooms on the same level]) and he's done remarkably well but more importantly the screaming really didn't wake the older kids once we moved him and there have never been any extraction attempts.
So, if I were you, I'd probably keep the baby in your room for a while because who knows how they'll be. My wife and I will always sacrifice a few hours of our own sleep if it means our kids get a full night - there's literally nothing worse than a sleep deprived, indecisive, whiny, hell-child toddler.
Once the baby is in a good sleep rhythm - ideally sleeping through the night - and you can confirm that the older kid isn't going to try and 1) extract the baby, 2) try to quiet the baby, or 3) climb into the baby's crib, I think you'd be free and clear to have them sleep in the same room.
I 1000% agree with you that the downstairs room should NOT be the kids' room. Perhaps you could look into some minor renovations to get a king to fit in there in case the cohabitation of the kids is not a pleasant experience. But honestly - kids are adaptable and can learn to love something even if they abhor it at first.