Just this morning, I was asked the question, "Do you never have problems with the modesty issue or having children go to sleep when they are all together and can have a hard time settling down?" This is actually a common question people ask.
First, I will address the modesty issue. No, we don't have a problem with modesty issues. Our family closet is located in another area of our home. We are training our children, when it is time to get dressed or ready for bedtime, they take their clothing into the bathroom, and change. Some of our younger children don't exactly get modesty yet. But we do have a house rule. "All children ages 3 and up must be modest in dress at all times." (we do cut our 3 year old a little slack, because sometimes she seriously needs help) If they aren't modest, then it becomes a discipline issue, which needs addressed, because they are breaking our house rule.
To answer the second half of your question. My husband reads to our children every night before going to bed. It is a time to settle down and relax. Everyone lays in their own bed and listens. A lot of times, a couple of children will fall asleep during the story, normally the younger ones. But the children understand that it is bedtime and it becomes a discipline issue if they aren't laying in bed quietly. They know that we ask them to lay still, so if they aren't obeying, they are breaking God's 5th Commandment.
I hope this helps answer your questions.