I think there are a lot of diffent answers to this question and much depends on the circumstances. Most importantly, IMHO , is if you have to use more points in order to book a larger room. If you do then , IMHO , there is a cost to you. If you are doing this as a treat for relatives, then that's fine. But it does leave you with the potential problem for people who invite themselves. I do think it's fair if there is some kind of "trade off" so no one feels they have been taken advantage of. It maybe equally important that a less well off relative doesn't feel "beholding" to a more affluent one, Even if the "room cost" is say $500, having it as a "bargain" that they take you to X restaurant is their share does ease any problems in that area.
I have "charged" relatives and generally work on either $9-10 per point or the cost of a room at an All Star for the duration. Sometimes it has been a $$ payment, sometimes they have paid for park tickets for the group, sometimes they have paid flight tickets for the group and sometimes they have paid for accomodation if we have split the stay with an off site stay. It's whatever works out for you, I know some people for a short stay opt for the guest paying for a meal one night ( although it may be worth pointing out a Mchappy meal is not consider sufficient as I know a member who fell foul of that tactic one year LOL

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IMHO the most important part of this is NOT to be shy or embarrassed about how you lay out the options. It can give the impression that you're trying to pull a con trick on them. It may help to write it down for them to take away and read through it, but also to help you to make the points as you would like to. It is potentially embarrassing and in embarrassing moments people have a tendancy to rush what they are saying and miss out important parts. I would work something like
Dear X , we would very much like you to consider coming on a joint vacation with us. We understand that you might want to stay in a seperate resort and just meet up at certain times as well as spending some time doing "our own things". The best deal I have found with a quick search would be $xxx staying at one of Disney's All Star resorts, although you may find a better deal at those resorts with more looking. If you did want to stay off site then you can do it cheaper, to stay at the same resort as us, renting from Disney would cost $xxxx . As a cheaper alternative possibility we could rent a larger unit than we had planned if you didn't mind entering into that type of arrangement with us. ( If you'd be sharing a 2 bedroom unit you can explain the extra facilities they would have access to like kitchen washer etc while their "room" is basically what a standard hotel room is)
I'd then put down some costs and points on paper
1) All Star cost
2) DVC resort cost from Disney
3) Separate DVC room through you
4) A dvc room that shares facilities if you're renting a 2 bedroom or a grand villa
5)The extra facilities and benefits (pool hopping)
It may sound harsh to put things on an "official" footing, but it really does save difficult moments if you're able to give them all the saliant points and they have the opportunity to think it through before rushing into things.