Communication is the Solution and the Problem
My Dad worked from home as a Vicar. This taught me a number of disciplines when I was working for myself as a software developer. A separate office, the right equipment and a distinction between "at Work" and "at Home" are needed.
But my Dad had to visit folks in hospital and home, attend committees etc. When working from home as a developer, I need to visit clients and attend meetings as well. Despite having used state of the art video conferencing (multi-camera etc) I believe the methods of communication available over a wire are just not good enough to replace human to human communication.
Requirements gathering, needs analysis, systems analysis, interface design and project management all require a high degree of understanding. The better the communication, the better the solution.
From a personal point of view, I feel I benefit from the cross fertilization which occurs when a team relaxes at the end of a week. Discussion of an issue over a drink can sometimes provide very good solutions.