That is how I play too. I have my exhausted family set to day and play them during the day. When it becomes dark my time and in the game I put them to bed. I always give lots of praise and they have no problems going to sleep while I am watching them. I also never pause, and I have the windows version.
It's been a few days and they are still exhausted .. >.<
I think you have to watch them once or twice while they're sleeping coz I know they tend to wake up and sometimes they dont want to get a drink (its acceptable) or read magazines (UNacceptable) then you've got to punish to stop it from happening.
To my limited knowledge, it doesnt seem to stop the first family. They continue their lives while you're playing another family.