We've stayed at a private home four times over the last eight years or so. I really have nothing but good things to say.
Actually, the last couple of trips we've combined staying in a house with a few nights at WDW, to get the best of both worlds. For instance, last year we stayed three nights at Wilderness Lodge, then a week in a house.
There is no doubt that you lose a little of the "magic" staying off site. Obviously, you can't just walk down to the dock and catch a boat to the Magic Kingdom...but if you pick the right place to stay, you should be close enough by car to have no more than a 5 minute drive to Disney property. (But, do keep in mind that when you see claims of 5 minute drives to WDW, they generally mean to AKL or the main gate...from there you have another 10 minutes or so to MK or Epcot).
One thing we really liked about having a house was the ability to use a pool or hot tub while the kids nap. This is not something you can do in a hotel. Plus its nice having the kitchen, etc. We really only ate breakfast and occasionally packed a lunch, but its still some savings. I really like the ability for us to spread out rather than climb over each other in a hotel room, especially if the stay is more than a few nights.
If you decide to rent, do check the location. There are places in Kissimmee that can be very close or very far away. Traffic lights on US 192 can kill you if you're in the wrong place. A few good spots are Oak Island Harbor, Formosa Gardens, Windsor Hills.
You can usually save some $$$ if you find a website that lets you book directly with the owners. Look at availability calendars. Obviously, you want to book somewhere that has availability, but look for places that have high occupancy. Beware of places that are "too available". Also, check for costs like security deposits, damage deposits, etc. and check the refund policy if your plans happen to change.
Good luck!