My mum lives with us (and dad did too, until he passed away). it works well for us, for the most part, and I think there are a few things that help.
Firstly, mum is quite elderly, so she is genuinely grateful not to have to worry about where she lives - we take care of all issues for her.
Secondly, she has her own space, including her own kitchen, so we are actually quite independent of one another despite living under one roof.
Thirdly, mum is very unassuming - almost to a fault - which means she doesn't try to interfere with my family.
And finally, we bought a house specifically for the purpose of living together, which means that we were able to each put our own stamp on the property, and it came with no 'baggage' from being my parents' home, or my childhood home.
I realise that this arrangement would fill many with horror, but if you can make it work it is actually a good way to live - for financial support, giving our kids a rounded upbringing, as well as giving my parents a somewhat easier time in their old age.