I would still use the room at the top and just pull up the carpet. If you are going to be using a backdrop the carpet won't be a problem then. I would not use the basement. Dark and dingy. I would also try and use a room with a little natural light. Goo luck
It matters how close/far the lights are to the subject. Same with the camera. More room, greater flexibility.
If you're doing "full scene" shots, feet and bottoms of props/furniture will sink into the carpet. That's a big deal if you're isolating the background from a subject. You can work around that by using plywood or cardboard but a solid surface is best.
Thanks for the tips everyone. I think I will try painting a sheet of plywood to lay over the carpet in the big upstairs room. It has lots of windows and a southern exposure. ,I love the way people are always willing to help out with ideas here.
Thanks for asking. I am waiting for good weather to paint. The upstairs room I tried, but it is really too small. No reason I can't paint the garage and the basement this spring and use whatever works best for the task at hand. Paint is cheap and anything else can come later :-)