I'd fill the bookcase with books with an occasional decorative item here and there. That's quite a hefty piece of furniture but it's filled with too many little things.

I think a larger painting centered over the mantel would look good. That could also bring more colors into the room. I don't think what's on the mantel is adding anything to the room.

A lamp with a more substantial base would look nice against that wall. Do you need more lighting in there?

I wasn't sure what that half wall was. Is it part of the stairway? I agree with Anglophilia about removing it.

Maybe save that blank space behind the sofa to stash the toys. My daughter uses a shallow shelf with baskets. Be careful of patterned rugs while the little one is still putting everything in his/her mouth. Toddlers are low to the ground and will find anything and everything down there.

You've got a wonderful room with lots of natural light. You really don't need much to finish it off.

I meant shallow shelves plural above. Kind of like a bookcase, but the sides are somewhat open.

I agree that the space behind the couch will be great for toy storage. Consider a cubby shelf system (ikea has the kallax - http://m.ikea.com/us/en/catalog/products/art/40275846/) directly behind the sofa or under the window for that.

I also agree that less would be more on the built in. Go for books or larger decorative boxes rather than lots of tiny items. I'd also consider painting it the white trim color as a way to lighten the room.

Could you center the couch on the window and use two chairs flanking the fireplace? It's ok if one of them obstructs the built-ins, layering works.

To expand on the idea from above, a cube organizer under the window with baskets for Baby's toys and books would be great. You could add a cushion to the top to make a window seat.

The behind the couch storage idea is good for not wasting space, but my fix would be to get a larger TV, fill the hole in the built in, which would hide the cords and move the couch back against the window wall. How is it blocking the window, the window comes down to the top of the couch. Adults standing at the couch have a completely unobstructed view. If the fireplace were being used at my house,we could not sit that close nor would I want a table/ couch that close to it. Does anyone sit in the slipper chair to watch TV? There is no view of it but I bet it would fit nicely back to the built in near the fireplace corner. If the under storage is used as sparsely as the shelves that is where I would be stashing toys each evening. I might even take one set of doors off just to break up the look, add baskets for toys. Easy in easy out. Truth is with little ones it is a time of clutter in the living spaces in a home. Be patient, it goes by all too quickly!!

Check out your local libraries for book sales. Sometimes on the last day or hours of the sale, they'll sell books by the bag and you can fill that bookcase in no time. It sounds goofy when I mention this, but smell the books so you're not bringing home any that are musty. I used to volunteer at a library and you could tell which donated books had been stored in a basement.

I'd center a sofa table under the window, with either some plants or lamps on it, and then push the sofa up against it. With all of those built-ins, you've got ideal toy storage, game storage, blanket storage, more than enough storage, and even better, it is behind doors.

Once the couch is pushed back, you can experiment with the chairs, either flanking the fireplace, or flanking the couch. It's hard to tell what exactly will work best from the photos.

Are those vertical blinds on the large window? We have a window very similar to that. Our home came with vertical blinds on the picture window that drove me bananas! We replaced the blinds with a single solar shade that rolls up and down with a chain; so much better! Our couch sits up against the window and we can now close the shades without climbing on the couch. (Pictures here.) You could do stationary curtain panels on each side of the windows.

I like your paint and trim colors. It looks like you might be gravitating more toward lighter, brighter colors, so you could paint the built-ins white and lighten the space (the wood will be more forgiving of little ones, though...)

Great advice above. Seconding painting the built ins white or trim color. Will brighten the room.

If you mount an articulating arm in the tv hole, you could get a much bigger tv and have it floating in front of the built-in instead of having the screen size limited by the width of the hole. I don't know how you feel about having a little bit of the shelving covered by a floating screen, but it just seems to me that it's the small space for the tv (and therefore the small tv) that is dictating the placement of all the furniture in the room so that it crowds around the fireplace. Your living room looks nice as it is, but it would look much better with some breathing space, in my opinion.

Here are some ideas on how to decorate shelves and for a sofa table behind the sofa. Perhaps both of these things will aid you with your dilemma.

Luxury Lorne Park Reno · More Info

Luxury Lorne Park Reno · More Info

I think stationary curtain panels at the large window would add a lot to the appearance of this room. I agree about painting the cabinets white and removing that small wall. I would definitely get a much larger TV; you'll be surprised at the picture quality nowadays and how the size enhances your viewing pleasure. It's well worth doing something to the cabinets to make room for a larger TV. I agree, lots of books, you can get them cheaply at Goodwill-type places and library book stores. It will really help to furnish this room. The couch and lamp table need to be moved away from the fireplace wall; even a few inches will help. You have a nice fireplace and mantel decor.