J.P.
I'd have the older 2 share the bigger room, as it will foster closeness and learning how to share. My brother and I shared a room until I was 10 and we had a 5,000sq ft home, so it was a room issue. We are super close, or were until he married this crazy woman, but that's a story for another day. ;)
Let them pick out paint, etc and decide on things together. Explain it as a reward and not a punishment that the new baby is coming. Just explain that they need their sleep and they are the big brother and sister, so if the baby cries, it won't wake them up. Maybe get them a combined gift for their room