When my baby was born, I co-slept her *and* her 2-year-old brother. We only had a queen size futon, so I took it off the springs and placed it on the floor, pressed against the wall. That way, if anyone rolled off, they didn't have far to go, and baby slept between me and the wall (I'm VERY aware of the babies while I sleep).
This meant that my oldest never felt like the baby was replacing him. They have no - zero - sibling rivalry issues. And last night my son spent the night in his own room for the first time. He wanted to do it, 'cause he's a big boy now (he turned 3 in July). There were no tears and no jealousy. Perfect!
I will say that having a newborn and a 2-year-old is very, very hard. I'm glad that mine are out of that stage, even if it's just barely! I wanted to wait until my oldest was 5, but it just didn't work out that way. :) Of course, I love both my babies, and they are both very wanted, even if one did come a little earlier than expected!