I tend to put the make up of the household in the Fact Note for the head of household ("Head, Wife, 2 Daughters, Son, Lodger"), then in the Fact Note for the individual I put "with parents" etc. or in more detail ("with Maternal Uncle, John") if necessary.
That works for me in diagrams - what happens in reports I don't know as that is an area I have not used/explored.
I thought about starting to use witnesses, but am not sure of the benefits for the way I use FH; I can click through to other family members using timeline facts in the Facts Tab.
David