I find the 2nd bedroom to be fine for one person, but too tight for two. The fold out bed is not a true bed; it is a hard couch that folds open. I would estimate it is the size of a double bed. It's hard as a rock and needs padding to make it even halfway palatable! The second bed folds out from the ceiling and appears to be a normal bunk. Depending on the size of your kids, and if they tend to bicker, I think being in quarters that tight may be an issue. It really is a small room.
The bed in the main bedroom is a queen, and very nice. My suggestion as others have mentioned would be two rooms.