People do it but in my opinion Pods are mostly for two people -- and can be a bit cramped for two.  With kids, an r-dome or some other outside room will be almost essential.  As far as sleeping, yes, that should work.

TT

The small cushions can be a problem. You may wish to check out mods (like mine, see link in signature) to make it a better bed for sleeping. At best, you will end up with a 3/4 width (48" x 75") bed. You can find sheets that fit a 3/4 size. With the table mod (pedestals instead of the swivel mechanism), the table can be stowed out of the way and the full bench seat of the sofa can be used while traveling as well.

Also, adding a curtain rod or some method of hanging a curtain for privacy for the queen bed is a good idea. I had a spring-tension rod that I use between the R-Pod's wall and the corner of the wardrobe. I had thought to put up brackets and use a plain rod, but the spring-tension one has worked well so far. The ones which have a twist-lock mechanism don't work so well as they don't stay adjusted and fall down but if you can find a spring-tension one, that works okay.

I would urge you to visit your dealer and shut yourself in the 179 and play house.  Put the dinette together, put the kids on it, think about where you will store those bulky corner cushions at night when your trailer is already loaded with clothing, food and linens.  It might work for you. 

I would also suggest you look at a 176 which has twin beds in the nose and a short queen-sized dinette bed and go through the same exercise.  

You'll note from my signature that I have owned both trailers.

Good luck with your decision.