We arrived a day early (
ABD late July 2010). My husband and I began taking prescription altitude sickness medicine while in Lima and 24 hours before arrival in Cusco. We had no problems. Our children did not take the altitude sickness medicine (pediatrician advised against it) and they were fine. My son (age seven at the time) only once complained of a headache, and he was okay after he had a dose of children's ibuprofen.
I know there's a fair amount of talk on these boards about altitude sickness and Peru, but IMHO it's somewhat overblown (and for good reason: Who wants to be sick on vacation?). I can't speak for everyone in our group (and it was a full group of 40), but I don't think altitude sickness was a big deal for most members of the group most of the time. I've no idea if others were taking the medicine as we were, but overall just about everyone seemed to be fine and enjoying the wonderful vacation ABD Peru is.
Another good reason to arrive a day early:
I think most of the flights to Lima arrive late at night, and it'll be an hour or more until you clear customs and immigration and make your way to hotel. Our flight arrived on time at 9:30 p.m. and it was about 11:30 p.m. when we walked into our room at Casa Andina Miraflores. We we able to sleep late the next morning and enjoy a leisurely day of sightseeing in Lima. The next day (the fly-to-Cusco day) we had to have our luggage outside our room at 5:45 a.m., eat breakfast around 6:00 a.m. and leave the hotel at 6:45 a.m. I was glad that we had booked a pre-day in Lima, for it would've have been hard on our children (and us) to hit the sack at midnight then be up and out the door at 5:45 a.m.