I've been working from home for ~9 months and we have a two year old boy at home. For me, I never expect to get any work done when I am in charge of watching him. I will keep an eye on the baby monitor for my wife if he is napping but other than that I commit my working hours to work and my non-working hours to my son and my wife. I do this because my work requires my full attention and my son deserves my full attention -- I am not comfortable trying to take care of both.
If your wife wants to go back to work then I'd really recommend an additional care-taker for when you are working. This is easier for us because we moved back to the area where we grew up and have 4 grandparents ready and willing to cover all our childcare needs (we are very fortunate, this saves us at least $15k / year where we live). Otherwise I'd look into a nanny or daycare -- I really recommend the parenting book Cribsheet for a data-driven approach to making these kinds of decisions.
All that being said, working from home with a child has been a wonderful experience. My son helps me make my coffee on each coffee break and I get to have lunch with him if the timing lines up. I am basically trading that time I would be spending around the water cooler with time spent interacting with my son. That's a pretty good trade-off if you ask me.
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