p.p.s. you could add a coffee table with some sort of storage within it for the kids toys [works for me!] and i might consider adding a low pile, large scaled area rug with a pattern or a textured weave to cozy up and define the seating area....it should be large enough so that at least the front feet of each seat is on the rug. don't forget to add some color too. i can't wait to see what you do here...this space has LOADS of potential! :] have some fun with it!

p.s. since the tv will be above the mantle, be sure to hang the new curtains from ceiling to floor, so the windows aren't being dwarfed by the tv's new height, and slightly tilt the tv's screen downward for easier viewing.
also, i see you love photos [so do i]...pick out your ab-favorites, scan them and reprint them all in one common size in sepia or B&W and reframe them in simple, storebought black frames [target? walmart? discount warehouse stores?] and try the ones with the mats built-in for a custom look, and hang them on one wall in a geometric grid...this will turn your regular ole family photos into an art gallery worthy installation for VERY little $ and effort! plus, it makes the photos more interesting and they will have more impact in the space without adding clutter.
:]

you have a lovely home. but before rearranging, i'd love to be able to convince you: to repaint the walls [this color is too peanut buttery and golden undertoned which is limiting your decor choices]; paint the mantle and baseboards white so they match the other trim, doors & window units; and replace the valances with simple, straight hanging curtain side panels on wide mounted rods, to make the windows seem larger. eliminating the huge E.C. is a fab idewill be fab! then arrange the sofas in the shape of an L, floating to face the focal wall [with the loveseat on the opposite side, where the tv was] and the chair placed beside the FP/TV to face into the L, where the loveseat is now. make sure to conceal tv wiring behind the drywall for a clean look. keep us posted! ;]