I’ve been working from home for more than seven years now. While I agree that the environment may not seem conducive to high productivity initially, it’s certainly possible to learn to get used to it.
One of the things that helped me a great deal was creating a space just for work — I converted the second bedroom in my flat into a study. When I’m in there, I can easily slip into work mode and not have to worry about getting distracted (at least, not any more than how I’d get distracted with a computer at my disposal).
As for people around me/watching me — learning to become self-driven and independent, and not relying on managers to breathe down your neck is an important skill and is certainly worth developing. Things like Pomodoro timers can help you focus on tasks and stay on track.
Food — you’ll most likely eat whatever’s in your fridge and pantry, so my recommended trick is just not stock unhealthy stuff. Buy goodies when you’re actually expecting company.
Slowly going insane — I prefer working on my own, but I know that’s not for everyone. Consider working at a co-working space or coffee shop once or twice a week.
Working from home reduces the amount of time you waste commuting and getting dressed — no one’s paying you for that. If you can figure out ways to iron out the kinks that bother you about it, you’ll find that it’s a solid (I’d say vastly better) option than working at an office.