I would vote for marmoleum -- true linoleum. It has a cork backing, which gives it a soft feel when you walk on it, and it seems to be fairly warm underfoot. Lots of different options available. Good flooring for active play. Easy to keep clean, kids can skate or ride bikes during the winter. Good for giant floor puzzles, too. You can always add the foam squares on top and put them away when they're done playing with them.

Thanks so much everyone! I really appreciate all your suggestions. I guess my downfall is that I'm a 'researcher' - I have to see ALL my options out there before I make a decision. Definitely no impulse buys for me - ha! But then of course, it drives dh bonkers because it takes me FOREVER to make up my mind! :) I was actually thinking of a warm cream or light yellow. Dh really wants to paint the floor sage green (which I don't really love, but I rarely let him have his way - haha). So do you think a pale yellow would look ok with a sage green floor? Does anyone have examples or pics of a nice soft yellow (I don't want anything TOO yellow). teacats, I love your art idea! I do really like some of those animal prints or we might even try to paint some ourselves. I was definitely thinking of having dh build a bookcase w/ colorful bins for storage, then I also want to have an arts/crafts area (with a dry erase wall to write on) then also a kitchen/baby doll area, reading nook w/chairs, sports area w/balls & bikes, and then a dress up area too. My problem is I have so many ideas - I just have trouble executing them all! Does anyone know of any cute kids rugs (bright stripes or some type of motif) for under $200? Thanks again for all your help!

Since it is going to be a play area I would go for the vinyl. Although carpet is warmer, play dough and paint is easer to clean off of vinyl. You can always add a area rug for floor play.

While we continue to contemplate flooring, we are moving on to the paint. We have decided to paint the back wall (below the two windows) black, the shelving will be white, topped with a stained board to pull everything together. (See inspiration picture from Bless ‘er House below) We’re going with Sherwin Williams Caviar black. Will paint that same black on the banister. Anyone have a coordinating white color recommendation to make for the walls and the spindles of the banister? I was thinking high reflective white - will that be too white for the walls? Painter due to come on Tuesday. Any input is appreciated!