I think nannies bringing their own children can work really well.
For your children they are getting the benefit of being looked after in their own home, but also learning to share their toys. If you get the right match of nanny and child, the additional child could end up being a great playmate.
The nanny will not be worried about her own child in nursery or wherever and will probably be more flexible as she will not be rushing off to collect her child for a particular time. This could work well if you are ever late, stuck in traffic etc.
Reducerecycleregift, it must have been horrible watching that person favour their own child. That person sounds like they should not be working within childcare and would probably always single out and favour one child even if she looked after children who weren't related to her.
You may find what many people do, when a childminder or nanny have their own children at work, their own child's needs often come after the minded children.
In terms of wages, I would pay someone exactly the same whether they brought their own child or not. If you had another child she would probably not expect to be paid any more. I think the benefits of a nanny bringing their one child are substantial and would not think of altering someone's wages due to their personal childcare situation.
Hope this opinion has been helpful, good luck with making a decision.