Ideally bedrooms should be a quiet zone, so living downstairs. Young kids need to be observed any want to be with parents so downstairs, As they get older they want to have their own space and may be happy with tv room upstairs.

in my experience young children with all their toys prefer to be closer to the adults and the adults usually need to supervise during daylight hours and it's more likely older kids and teenagers who want more private spaces and that could mean an upstairs bedroom and TV room away from general family activity but, given the choice, our older kids preferred an out of the way downstairs bed sitting room where they could entertain their friends and were never happy with the same space upstairs but most families have to use what they have available...i think of a rumpus room as a space for noisy activities and upstairs for quiet times

I like to try to keep bedrooms as a quiet and calm zone. I think the best thing you can do with a rumpus area or playroom is to be able to close it off - doesn't matter where in the house it is. That way you can hide the mess until you can deal with it later.

If you are worried about smaller kids, then simply have a small storage basket of toys in the family area to have on hand. But it doesn't need all the toys - just a few select ones that you can rotate around. Kids get bored of toys easily as well so this keeps them feeling fresh and then everything can go back in the playroom...wherever that may be.