We did a nannyshare that sounded quite similar to your set up a while ago, and although it worked quite well and suited us both to a large extent, it wasn't without its downsides. I put the word nannyshare in **s, because in reality it was more a case of us using the other family's live-in nanny as an unregistered childminder, since the care was always at their house and we had little say in the arrangement.
My ds was 14 months when we started, and the other family had two older girls ? one primary and one nursery-school-age. What I hadn't reckoned on was the fact that both girls went to different schools and the younger one only did half days, so DS spent an awful lot of time in the car on school runs and going along to after-school activities, which wasn't ideal, and often involved DS being whisked out of his cot from his morning nap to be ferried off somewhere (it was even worse in the school hols as both girls seemed to have wall-to-wall extra-curricular activities). On the plus side, DS adored the older girls, and they seemed very fond of him, and he really enjoyed all the attention he got and his language came on amazingly. He also got some real one-to-one with the nanny when the girls were at school, which is so important when they're small.
Cost-wise, we paid £35 a day, similar (or slightly less than) we'd have had to pay for a split-cost live-out nannyshare. I think the nanny got about half that, in the form of an increase for looking after an extra child, and the other mother kept the rest. That was a couple of years ago, mind, and in London ? it may vary depending on what the going rate is where you live.
Holidays were also a bit of a problem, as the other family (obviously) took all their leave during school holidays when going away costs a fortune. Thankfully, I get quite a lot of leave with my job and we have grandparents who can muck in if needs be ? we didn't get any say in when the nanny took her (paid) holiday.
I would have thought with only one other child in the equation, it would be quite a good arrangement for you, although a lot depends on how you get on with the nanny, the other mother, and how your approaches generally coincide. Hope that helps a bit ? childcare is such a nightmare! I'd probably say, if you like the nanny, go for it!