Right off the top, I'd paint the all walls something darker -- maybe a warm, mid-tone neutral. It will immediately make the room cozier and pull the elements together, so everything doesn't look quite so "freestanding." When you've done that, you can decide whether you need the accent wall by the fireplace. But also think about just accenting the chimney, not the whole wall, maybe with just a darker or lighter tone of the wall paint.

That looks like a lovely space--plenty of light, large room, fireplace, nice wood floors.

Some questions first.

What are the primary functions of the room? TV watching, sitting and chatting, eating, listening to music, reading, entertaining guests, watching the fire? Make a list of all the things you want to do in this room. Then consider whether you can do them in the room as it currently is, or if you need to add/replace any pieces. For example, if you'd like to use this room as a cozy reading spot, is there a comfortable chair with a good lamp and table nearby, or is reading frustrating because the only place to sit with good light isn't comfortable for reading for long periods of time and there's no place to put down the book or a cup of tea?

Second, traffic patterns. Most of the furniture looks pushed up against the window wall. Is that to leave a clear path to the doorway at the upper left? There are ways to arrange furniture to avoid the "bowling alley" effect. Could you post a drawing of the surrounding rooms so we can see the traffic flow? And is there a space outside the window that you access from this room?

Third, what's that box hanging from the ceiling? Is that a projector? Where's the screen?

As for style, cozy doesn't have to be cottagey. With the furniture you have now, I'd consider getting a large area rug or two. They would help define the space, and add some warmth, even if they are a modern design. A throw in a vibrant color. Dress the window in plain white sheers, maybe on a cable system from Ikea.

But I really feel that rearranging the furniture will create a better feeling of coziness. I'd create two separate areas in the room. One up by the fireplace, with maybe a loveseat facing the fireplace, with an end table or two and a lamp. Or two chairs with a round table between them. Anchor that grouping with an area rug.

Then a second, larger grouping in front of the windows, centered on the TV, using the sectional. I'd consider a different coffee table, or painting the one you have. Again, with a large area rug to anchor the seating area.

As for colors, orange always seems like a modern color to me. So I'd consider swapping out the orange in the room for another color that would go with the brown.

And ideally, I'd replace the huge speakers with smaller, wall-hung units, but that would be expensive.

This post was edited by camlan on Sun, Jan 13, 13 at 10:36

Thank you for you (extremely fast) responses! Here is a rough floor plan - approximately to scale. This area is used mainly for watching tv, entertaining guests, occasional work on laptops, and reading in the winter (in the summer, the loggia is my favourite room for reading, but it's far too cold in winter!) The loggia window has a distant veiw of some mountains, and closer there are some houses - but as we are one floor up, we are not overlooked at all.
The projector screen falls down between the two large floor standing speakers nearest the camera - you can see the backs of them on this photo. We don't often use it though. The kids tend to walk through from the double glass doors to go the kitchen, instead of using the corridor, but that's just kids being awkward!! I don't like the bowling alley effect, and would love to move everything around, but the OH isn't so keen - once it's moved, he would kinda like it left there. (in the uk, I would move everything around every three or four months! ;) ) So I need to plan very carefully roughly where everything will go, before moving anything!

Looking forward to reading any other suggestion you may have regarding colours and furniture placement....once this room is done, there are only another 3 or 4 I need to sort out! ;)
thanks Rx