In January we decided to just go ahead and turn the loft upstairs into the nursery (for convenience in sleeping arrangements and so that every kid will have their own room upstairs) and move the playroom (the loft) downstairs into the "guest room". We had been using it as an office/craft room/ guest room. It's right downstairs on the other side of the entryway.
We wanted to do a little customization to it first though. We decided to take out the closet and door to the room and widen the entrance to the room. We knew we'd have to re-do the flooring if we did that but we wanted to anyways...
We had to re-texture parts of the closet, repaint the ceiling, switch the ceiling fans, move the light switches, paint, put in new flooring... it took a while. BUT it's done now and so worth it. It's so SUPER nice not to haul toys up and down the stairs anymore.
Eventually, when the kids outgrow a playroom, we'll then convert it into a family office of sorts. Currently the desk and computer are in our bedroom, which has worked out well. It's nice to be able to customize our house into how we need it and make it work better for our family.