We have a two-year-old and a three-year-old, both boys, and we live in an 1100 square foot townhouse, two bedrooms, 1.5 baths. (I work from home two days a week, but I just sit in the living room with a lap desk.)
It's fine. We're maybe a little cramped, but that's because we have too much stuff and we moved here from a larger place (provided by husband's employer). We rent right now, and would like to buy in a year or two, at which point I think we would look for a third bedroom, a full second bath, and a little more living space.
Sharing a bath with the kids is no problem at all. We just keep their toys in a bin we got at the dollar store. The Brady Bunch had six kids sharing one bathroom, and it didn't even have a toilet. (This is true! Look it up!)
Guests: We recently had a family of three as guests (my husband was actually out of town). Both our kids slept on the floor in our room--Big Brother on an air mattress, Little Brother on his own twin-mattress-on-the-floor, dragged in from his room. Guests slept in Big Brother's double bed, with their baby in our old Pack n Play. Maybe we didn't sleep awesomely, but it was fine.
Re: room sharing--my sister's opposite-sex children shared a bedroom from when the girl was about 7 or 8 and the boy was 3 or 4 until the girl started middle school. Slept on bunk beds. Guess what? They were not scarred by the experience.
What i'm trying to say is, even if you do decide that you love having a baby and want to have another, you are YEARS away from needing more space. You have plenty of room to raise at least one child, so why not see how you like this one and go from there? If you did have another "oops" while you were still deciding (cough, cough, that may or may not be how we got Little Brother, who is all of 16 months younger than Big Brother), you will have plenty of time to look for a larger house IF you feel that you need to.
And congrats on the new baby, by the way! If you wanna talk about cloth diapers, you know where to find us :-).