I agree that a patio one-step high across the entire recessed place would look uncluttered and would give you an outdoor living space. I would suggest taking out the landscaping timbers on the right and putting the small shrubs into large, colorful pots you can place on the patio or re-distribute throughout the yard. I like the simplicity of the beige and white on the house and the contrasting colors of the evergreens.

you have a really great yard! since the front door is hidden, i think i'd consider removing everything from that recessed entrance area and add either a paver constructed patio or low wooden deck to enlarge the front porch area, making the entrance more prominent. also remove the old fashioned looking shrubbery and add in some modern looking plantings like grasses and some interesting, sculptural plants [allium?] with clean lined lighting fixtures, house numbers, stylish seating on the porch area and a pop of fun color on the door to give this retro-style house some modern lines. sooo much potential! keep us posted! :]