I'm surprised you're seeing those results. That part of the search functionality has worked for me in the past when looking at Europe. I just repeated a search I'd done in Madrid: looking for a room for tonight for 1 guest in Madrid returns 19 results. When I changed it to 3 guests, I only get 11 results, and the rates jump to show that the room type has changed - at the Santo Mauro, the rate changes to 1000 Euros because the only room type that will hold 3 guests is a suite!

Just for fun, I also ran a search here in SoCal, and when I entered 2 adults and 4 children, all of the results were RI, TP, SH or Courtyard/Fairfields with family-type rooms.

Have you tried more than one city? It's strange that I can't replicate your results.