if I decide not to build the bedroom wing on my house, and I adopt a kid or two, would they just sleep in that room on the upper level of the main hall instead?

I ask because I find it very strange to have the kids sleeping in the same room as my wife and me...

Yes, they sleep in the single beds on the upper level if you don't build the bedroom addition. However, when you build the bedroom addition the kids automatically start sleeping in the newly built bedroom.