J.G.
My kids play in the family room/toy room. It is in the basement. I use to allow toys in the living room, but decided about 2 years ago that I wanted my house back! There are some puzzles in the living room, but that's it. They do occasionally build forts in there, but it isn't a playroom, and it needs to be cleaned up as soon as they are done. They do play a lot of imaginative games in there --the rug is a pool, etc. In some ways, being toy free requires them to expand their horizons.
I also bought plastic containers for all of their new toys prior to xmas, and I cleaned out the toy closet (in the family room) so that they had homes immediately. In fact, by xmas afternoon, everything had been put away in a new home.
As to playing with the kids, I rarely play with them, when they are "Free playing." They tell me to go away, they are putting out a fire, going camping, etc. Sometimes they want me to come to their "shop" and buy things, but for the most part, they play on their own. They are a 3 and almost 5.
There are also some toys in their rooms. They just moved in together last weekend, so as of right now, it's mostly my daughter's stuff (doll house, all her fairies).