We live in a two bedroom flat and have our home office spread between the living room and the bedroom, and boy is it a squeeze!
The bedroom contains the filing in a four-drawer A4 filing cabinet, and the living room (17 x 10 feet) contains both our PC's, as well as usual living room type stuff. We don't have a separate dining room, so there's a dining table in there too.
My dh built a special unit to cope with it all. It's not the most attractive thing, being made of 80s retro black ash, but it's functional and matches the video/DVD shelves (from dh's bachelor days) which feature prominently in our living room!
The unit stretches two thirds of one side of the room. It accommodates a TV in the middle, with printer, DVD, amp etc underneath, flanked either side by a three drawer unit with monitor on top and tower PC underneath. The keyboards are on slide-out drawers. There's a fax phone and a scanner squeezed into the equation too! The PCs are networked to each other and both are connected to the amp and main speakers, which is great for playing MP3s!
It is possible to do, but saying that, we're actually planning to move to somewhere bigger, as it is rather irritating being crammed into a tiny place with no room to swing the proverbial cat. No room to have any pets anyway, so any potential cat-swinging wouldn't even be an option .