I allow rough-housing, IMO it is an important part of human development. Like everything else, I teach them how, but they also teach themselves - there is only so much a friend will endure and that is an important part of growing and learning.
An interesting read to support rough-housing: http://psychcentral.com/lib/6-benefi...r-kids/0007973

As far as the arguing - I often take a wait-and-see approach and if it goes arwy, I try and guide them back on course. We talk about how we would want to feel ect.