Hi there - we have had two NWOC (nanny with own child).
They worked well at the time, but we now have a nanny without a child, and for my older children that works better.
Our contract was standard, plus (like Mr. Anchovy said) a paragraph that explicitly stated "the nanny is permitted to bring her son XXXX to her place of work with her". I wanted to make it explicit to one child, because I certainly didn't want it to automatically become "children" further down the line.
We eventually bought a high chair and some inexpensive 'baby' items for use by the nannies... they did bring their own to start with, but i remembe how hard it is lugging baby gear to and from, and I wanted to make it easy for all of us. We have friends/relatives with babies who use the kit anyway, so it's not wasted.
We gave our nanny a storage area for her baby's toys, nappies, spare clothes etc., so again it wasn't too stressful to lug it all back and forward.
Re: Paying. You need to be very clear on who pays for what. Paying for activities: in my opinion, who pays is down to who 'instigates' it. Typically, if I arranged / requested for my children to attend Tumble Tots / the cinema / the zoo, then I paid for the entry of the Nanny AND her child. It wasn't her choice to go, hence the cost was down to me. Especially if you are paying her a lower rate - that (to me) leans even more to you paying for activities.
If however, your children are roughly the same age, and you both agree that they'd all benefit from going to a Playgroup/Tumble Tot type things, then maybe you could negotiate - but if she's going predominanltly under your instruction, then you pay for that.
If during the holidays, your nanny takes you children to the park / cafe / pizza etc, you pay for her meal / coffee / ice cream... it's like expenses at your own job; if you incur cost in the line of duty, you reclaim. We have a kitty tin that's always got cash in it (unless I've nabbed it!) - our nannies simply take what's needed and provide the receipt. They have all been under initial instruction though - "kids have a Calypso lolly, not a £3.95 ben and jerry's" etc, that sort of thing, so they know your guidelines..
Re: Food. I allowed both the nanny and her child to eat our house food. She often bought her own, but all of my nannies have had access to the fridge / kitchen, and I want them to eat with the children / share social eating etc. Their children ate our food too.
For what it's worth - both our nanny's with own child were exceptionally reliable and tried their best to please all children. I hardly had any situation where they couldn't come to work because their child was ill.
Good luck; you just need to agree the rules up front, accept that you're both parents and need a bit of give and take, and you should get along fine.