Renee,
I vehmently disagree that it is traumatic for children to witness birth. As Dachlostar so beautifully tells her story children at the births of their siblings can be one of those precious memories.

I can speak from personal experience. I have had my children at all of their siblings births. When I was pregnant with my son my daughter then 5 came to all of the midwife visits and was very comfortable with palpating her brother inutero, listening to his heartbeating through my belly and generally watching him grow. She would ask about the birth and we watched some beautiful birthing videos. There was no way I could leave her at home on the big "Night". One of my most treasured memories was of her saying as her Daddy reversed the car out of the drive... "how exciting we are gonna have a baby tonight!". And WE did. She had her "labour bag" full of edible treats, little toys from dollar shops, books etc. She ditched them to watch in awe as her mother birthed her brother. She then piped up that she wanted to cut his cord. And she did.
Our son and his older sister also joined in the birth of their sister (Finn was 2, Ruby was 7 when Lucy was born). Another beautiful family occassion. Finn 4, Ruby 9, Lucy 15 months were all present when their sister Eva was birthed. Not one of my children were traumatised or afraid. My husband and I educated them very well. We made "noises to make the baby come out", we spoke very frankly and openly that Mama would feel sore and make these noises but they were to bring our new baby to us. We watched videos and a favourite book in our house is "Hello Baby" - the story of a home birth. My children were supported through all of my labours by a friend delegated to care for and advocate for them.

If the parents see birth as fraught with danger and fear so will the children. Where birth is talked of as the normal, sacred and beautiful event that it is children will also adopt this attitude. Women who are well supported during labour make lots of wonderful noises but the screaming sounds that people feel will frighten their kids generally dont' happen when a woman feels safe and well supported.

It is very important to have a person there for young children as their support. If they did get afraid or bored then that carer can step in. If there was some event that the children needed to be removed from, again the carer could do this.

I have been at countless births where children were present. Never have I seen a traumatised child! Granted, the women who choose to have siblings at their births spend lots of time preparing their children with visual images, sounds and affirmation.
If the mother feels confident and trusting in the birthing process this is passed on to the children.

If you do choose to have your older child at the birth of her sibling and you prepare her well AND she has a designated carer I am sure you will find it a beautiful experience.

As Dachlostar says, in some countries it is ABNORMAL to lock children out of birth. Birth is seen as a natural, normal event that is shared by families.