In light of the H1N1 virus and the upcoming winter season, your company, no matter what it's size, should have a telework policy in place. Your email shows a reason to get going on this at once.
Under a telework policy, employees and their managers sign an agreement stipulating how they will keep track of their time and work done, what equipment they will use, what is needed from IT regarding server access, etc.
These measures should negate your hesitancy to allow employees to work from home unless these particular employees have given you cause not to trust them.