You can all share the same Apple ID for purchasing music and apps without any problems, but you should have separate iCloud accounts using separate IDs on each device to avoid merging your data. (If you share the same iCloud account any data you sync with the account such as contacts and calendars will be merged ending up with the issue you're concerned about.) The important thing to know is that you don't need to use the same ID for purchasing as you use for other services such as iCloud.
You should also use differend IDs for FaceTime and iMessage to avoid getting each other's text messages and FaceTime calls. This article may be of interest in this regard: http://www.macstories.net/stories/ios-5-icloud-tips-sharing-an-apple-id-with-you r-family/.