Okay, I typically get the wretched offspring because I find it hilarious to put themed hats on them.
In one save, my favorite when it comes to themes for my mobile hat stands (my preferred term for the kids), was when I put the witch hat on my daughter and the skull mask on my son... so they were 2/3rds of Boogie's Boys (from Nightmare Before Christmas).
Still, that room will often change. In one save the kids got the basement room (the one south of the old bedroom). In another they got the upper right. In another they got the upper left. In another they stayed in that room. Which room is pretty much whim driven, though I do try to do something new every time.
As for what to do with rooms, in general? Make an aquarium room, a den/study, a library, a home office, an indoor garden/greenhouse... someone suggested turning the upstairs into the apartment you live in (you, spouse and 2 kids), the basement room into a processing/storage room, and then turn the entire ground floor into a bar/restaurant. I mean, the possibilities are endless.
Somewhere you can go for inspiration? In the showcase, what some folks do with sheds, you could use for ideas to do in rooms in your house.