I guess my thoughts are that there's not much of a problem with kids occasionally being allowed to "camp out" in the living room, as long as it's not a school night. You didn't really give us enough information to know whether they are asking for something like that, or something else. You have five kids, but you didn't say whether it's all the kids, the younger kids, or just one kid who wants to sleep in the living room. Is this an "every night" problem? Do the adults or the older kids ever use the living room space after bedtime? If it's multiple kids, if others use the room even after someone has laid down there, if its every night or on school nights, you might want to consider whether the sleepers will get enough sleep if they camp out in the living room. Staying up later, talking and playing is probably unavoidable in any of those situations.
I think the reason we "put kids away" in their rooms at bedtime is to help them release their minds from the day, relax and fall asleep. It is difficult for anyone to sleep where they can still hear the sounds of others who are in the midst of activity. It seems like most kids fight bedtime. Being together in the living room may make bedtime easier and feel like more fun - but it may also make it more difficult for them to get sleep they need. I recently did some research on sleep because our ten year old fights going down with everything he's got. I learned that kids 6 and under generally need 12 hours of sleep and kids 12 and under generally need 9-10 full hours of sleep! So part of the answer to your question is, how is it affecting their total overall sleep?
Good luck with this. I really relate to your desire to give into anything that helps get them to bed, but you also have to think about whether it meets other family goals, e.g. are the kids getting enough rest, and is it disruptive to adult time because they're in your space? Maybe you can use the promise of a weekend living room "camp out" to get them to bed more easily the rest of the week. Let us know what you decide to do...
S.