A couple of warnings:
1. A danger of working from home is that work is always just a few steps away. I've lost many hours of my social and family life because I had a thought running through my brain about a problem I was working on and just sat down for "a minute" to look at it. :)
2. If you work for a US company as an employee, the IRS tax credits for home office expenses are extremely unfavorable. Anything you want to count toward work has to be kept completely separate from home. If you store household junk in your office, an auditor can make the case the office isn't deductible. If you have a business internet connection, but it is also used in the rest of the house, you can't deduct the whole thing, only a fraction. When I tried to deduct the expense of building out my home office, it didn't work out to any sort of noticeable impact on my taxes. :/
Advice:
* Have a schedule and let people know when you are breaking away from it.
* Ensure friends and family know that when you are "at work", they should treat it just the same as if you were out of the house at an office. Make sure they don't feel it is acceptable to just come into your office and interrupt and that you might not be able to just take off on a whim.
* Have a pull mechanism for notifying co-workers of your schedule. People can get irked about lots of e-mails that you are going out for an extended lunch, etc. So set up a calendar or website where people can visit to see if you are available. Using the "Away/Busy" functionality of your IM client helps too.
* Have a pull mechanism for notifying co-workers of your work progress. Make sure you keep your issue management system up to date with what you are working on and lots of checkpoints along the way. A weekly status page similar to a blog might also help. Basically, provide your co-workers with an easy way to see where you are and what you are working on whenever they might need to without being barraged with e-mails.