I understand the limited bedroom issue and understand the different sex sibbling issue and think it is just fine. They are still young and you have some years where it is just fine. I think you should go ahead and make the move now from the matress. Actually you may have better luck with your DD having the belief that the bedroom is the place where she is "suppose" to sleep. I think as long as you have a 3 year old on a matress in your room, she is viewing this as her "sleep space." Help her take ownership to her room and her bed. Then once you have done that, I think the trick is putting the baby down before your DD. If one or both are light sleepers, you will have to get some white noise going to lull out the distraction of each other... Good luck, be firm and know you may have a few rcoky nights. No, it is not too soon, it should be done now.