Let's start with the essential pieces and then see what furniture can come back in. Move the game table to the wall where you have the dog bowls to get it out of the way of the door. Try flipping the sectional so the longer leg faces the TV and the short leg creates a path between it and the game table in its new position. Put the arm chair by the wall in front of the dog crate, angled to face the TV. You can put the white end table between it and the sofa for now, but it really is too tall, You should replace it with something just shorter than the sofa and chair arms. If there's room, put the slipper chair next to the white chair, between it and the door. Any piece of furniture that doesn't serve a purpose needs to exit from this room.

Yeah, you're sort of screwed by the doorway to the dining room -- there's no real way to set up the door side of the room as more than a sliver by the windows. You're on the right track in treating it as two separate zones, though. Here are a couple ideas that might help you visualize the right solution for your family. 1) Treat the area near the door as a Kid Containment Zone. Put a bench where the entry table is, with baskets underneath for shoes, and maybe a couple of hooks for (future?) book bags and so forth. Then put a small table right next to the door, in front of the sidelight, as your entry table, with a bowl for keys or mail or whatever (and a drawer for mittens). Reading chair and lamp in corner by dining room, to look inviting for a pause, might never get used, or could have a small bookcase for kids when they need a moment to themselves. 2) Make that zone a gaming area, with a smaller table against the windows and 2-3 chairs. Floor lamp in corner for evening activities. A puzzle could live there, or it could be the go-to space for games. Or you could instead do a lower crafts table and a storage cabinet. (You might have those kinds of spaces elsewhere in the house.) 3) No matter what you do with that zone, I'd enlarge the living area in both dimensions. Couch against the wall with chairs on kitchen side, table and lamp between chairs, large coffee table (think a big circle!) that can double as together-activities zone. Use a big area rug to anchor and define this area, and let it come down very close to the hallway to the bedrooms. This will help you scale your furniture and help eat into the dead zone. If you entertain, you might add another arm chair on the doorway side of the ensemble, or use an L-shaped couch, to encompass more seating and enclose more space. HOpe this helps!

You guys are a bunch of geniuses. My key take aways: make Beverley’s adjustment to the couches; consider the parallel option again move the tripod lamp to the other side for balance consider adding second identical coffee table or look for similar square one lose the awkward slip chair spot and follow groveraxle’s good ideas above art not mirror above the couch. One large piece, keep it simple, maybe something along the lines of these ideas:

I would put TV on the 168" wall with the couch directly facing it. Husband's recliner to the right (if facing couch) of the couch angled towards the TV. A reading area (chair + small table + task lamp) near the bookcase/fireplace area.