It's a tough scenario. One of the first big managerial problems I had to face was when I was still a snot-nosed twentysomething working at a Fortune 100. I came back from lunch and was pulled into another director's office, who quietly told me that two of my employees had spent the last hour screaming at each other in the hallways and would I make sure they "stopped scaring the goddamned children." Turned out they had been secretly dating for the past six months, something that I was totally ignorant of. The relationship crashed, then burned, and then I had two senior-level sysadmins (each about 10-15 years my elders) who refused to work with each other. Even though we eventually worked through the professional problems (didn't realize that couples' counseling was going to be part of my ambit), they ended up with a lot of bruised feelings and I (for good reason) permanently lost a lot of political capital.

On the other hand, there are plenty of people who can be in a relationship while working with each other. Hard cases make for bad law, and I'm uncomfortable with blanket proclamations against relationships at work, as long as two people at different levels along the same management line aren't seeing each other.