In my 17 years as a mom I've done both at one time or another. Working away from home with little ones certainly has it's ups and downs. It's really not an easy thing to leave your child in the care of someone else - especially if there are problems. (And there are all sorts of possible problems). However, staying home with small kids has its ups and downs as well. I really struggled with being a full time stay-at-home-mom.
For me, I found that working part-time is a great solution (especially if you can find very creative childcare options like close friends/trading babysitting/grandparents/daddy's off hours) Working part-time still gives you plenty of time with your kids, gives you some income, gets mom out and talking to grown-ups a little each week, and can help your child adapt to being away from mommy for short periods of time. So to answer your question... if I had the choice (meaning money was not an issue), I would work part-time... no more than 20 hours a week.
Even when kids are older it can be difficult to work full-time. I'm very fortunate to have a flexible schedule at my work so that if I'm needed for any reason, I can be there. However, I constantly feel that I do not have enough time and have learned to let certain things go in order to make time for the important things in life. I hope that all of my kids know that they are much more important to me than my career.