I work from home / where ever every day. And, it is wonderful. I can even take as much unpaid time off as I want, whenever I want, as long there is no disruption of business services to our clients. This works because I get paid hourly (I don't work = I don't get paid) and we have very fine granularity in tracking what work was done when. There is also high trust amongst all the team members that everyone is being honorable.
It does work, but has its drawbacks, for one it's communication requiring extra skill (and effort) when people don't see each other frequently. Seems that way to me (I currently operate in an environment similar to yours).
