My daughter had a home water birth 6 weeks ago. Her children, ages 10 and 7 were involved. They were fascinated. They were not frightened by their mothers cries and obvious experiences of pain. They mostly played in their rooms until Mom got in the tub and they were told the baby was coming. They stood right next to the tub and watched it all, asking questions. There were 3 midwives and one of them kept them far enough back that they didn't interfere with the birth. She also answered their questions. They were so excited. It was definitely a positive experience for them.
They have been attached to that baby since before it was born. I think seeing her born increased their sense of being big sister, big brother, who has some responsibility to her. They cuddle with her, lay down on the bed or floor next to her and talk to her. Are eager to help by getting diapers, clothes, blankets for her.
Both kids were involved with the pregnancy, hugging mom and baby, talking to the baby. Talking with the rest of us about what it would be like once the baby was born. It seemed that watching the birth was a natural follow up to that.
Added: they did watch births on TV programs. My grandson wasn't very interested in the TV births but was right there very interested in the birth of his baby sister.