Thankyou for your suggestions Cara. I am getting the whole house repainted. The painter will be doing minor repairs such as caulking. So I thought if he can do a drywall to cover the niche which I have never liked (both the niche and the fireplace are off centered). I find TV over fireplace too high to watch in the small room and it hurts my neck; though it would be perfect if watching from the kitchen while cooking. So the TV will have to stay in the corner. FYI, I have never used and do not intend to use this wood burning fireplace. So I will only be decorating it

Thanks for the suggestion of slats of wood. I believe these will become studs when hanging something on the wall. (I hung a curtain pullback on a wall upstairs that did not have studs and it came off inspire of butterfly screw holder).

Here is a picture of the kitchen. The cabinets are white and the counter top white carrara in quartz. So I want the fireplace wall to be accent painted in a darker shade of grey. The other three walls in continuation from the kitchen in a light grey color. The fireplace mantel is a drywall. I think I can get a ledge or a shelf kind of thing to be set over the existing mantel all in white.

I am not a fan of the tan ceramic tiles around the fireplace. Maybe get a floor guy to replace them with accent white-grey tiles around the fireplace (not sure if it can go on the floor). The fixtures all changing to dark brownish to match the door handles in the kitchen.

Tiles similar to this : https://www.wayfair.com/MS-International-Greecian-Splitface-Marble-Mosaic-Tile-in-White-MVP3352.html

and http://www.homedepot.com/p/Smart-Tiles-9-65-in-W-x-11-55-in-H-Peel-and-Stick-Mosaic-Decorative-Wall-Tile-Milano-Carrera-in-Grays-Box-of-12-SM1060-12/206876229 

I do not like the floor because the wood has been sanded poorly and has deep marks and grains showing. I would like to replace it with a dark brown floor though I am afraid if it will be too dark for the space. We do get a loooooot of sun in the kitchen and the family room from AM to early afternoon. The sofa is dark brown too. Last thing will be to decide on the color of the painting over the fireplace. Phew! that will be my whole project. But for now I am starting with paint estimates including niche closure :)

The house is 20 years old. The wall are currently the standard white from when we bought it.

Thanks.

The reason I don't mind going with grey is because it was suggested that grey will go well with the counter top. It will be my first. I am actually a beige-brown-coffee, and sometimes maroon, kind of person.

I like the grey. And I like the idea of doing the fireplace wall in a darker color, as a feature wall. Even if you aren't using the fireplace (I don't use mine either) I still think you should highlight the mantle. Totally agree about replacing the tiles with something nicer to highlight the grey.
I also hate TVs over the mantle, so I think it's fine on the floor. If you have a dark brown sofa, I wouldn't do dark brown rug. Look for something in a darker grey that has a little visual interest. It's going to come together great!

Thanks Cara. I am thinking of doing a black n white kind of tall painting on the wall above the fireplace as the safest bet to match the color scheme overall. But I feel it does not look lived in until I have personal stuff displayed. So can I put 2-3 white ledge/shelves on the side wall over the longer sofa to put small items? These items will end up being a few different colors, and perhaps a kids trophy too

You could do that yes, but as the focal point in the room, I'd try to add in some color if if I could in the art piece.
I agree about not looking lived in, just be careful not to clutter up with too many small items. You can put the shelving up, but if you want them just to display knick knacks, I'd think again. Some shelving with a mix of art/photos, some greenery and a few sculptural objects (like the trophy) can work. Just remember to keep things a mix of scale, and to keep some visual space empty.

Thanks a lot Cara. Do white shelves on a light grey wall go well or should I opt for dark brown?

I was thinking staggering the shelves so it does not cover the whole 6' horizontally above the sofa. Perhaps two 3' shelves or, one short one long

Thanks for lovely suggestions Cara :)

pbeq,,you'll have to ask your painter if he does drywall repair. sticking in a piece to cover a hole and feathering it to blend in seamlessly w/the rest of the wall is an art form. Otherwise, you'll end up with a 'bump' if the guy doesn't know how to finesse it. if there is an orange peel texture, that will also have to be matched and feathered in to match. you will need a small stud or two, vertically, in order to attach the drywall piece. it will have to sit back a bit so when taped and mudded, it's not 'proud' of the existing wall.

If you painter doesn't double as a drywaller, I would have someone else do that hole for you. It's not as easy as it looks. trust me.

Thankyou Beth for the suggestion. I will look for a drywall contractor too