Ok, wasn't gone that long. In the meantime, could you put your sofa on angle toward the tv? Just line it up with the rug. Take your leather chair and place it along the short side of the rug next to the window. If your small table will fit in the corner of the sofa and chair that would be a good place for it. Oh, and if what I think I'm seeing next to the tv(stacked suitcases) you could put those in that corner instead. The decorative key might look good above the cut out to the kitchen...hung long ways. Take down the art print on the wall next to the cutout and arrange a collection of your photos. Try not to go hang any higher than the the print currently is and have the bottom of your last frame hit below the height of the bottom of the cutout. I know this isn't what you were asking for, but while you're planning room layout and the more permanent direction you want to go in...there is no reason you can't try something different with what you have right now.

We did go with Ikea, the expedit. I LOVE them! I keep bugging DH to go back and get a couple more for our basement. I think they are great storage. I did think about using some of my DR furniture for storage and keeping it, but I just didn't think it would work for me. There are doors they make for the Expedits and some people paint them. There are amazing pics all over pinterest. I saved some to my playroom board and have it linked below, but there are so many good ideas. Here is a link that might be useful: Playroom pics

Paint it a lighter more neutral color and paint the ceiling white. That dual colored ceiling does not allow the ceiling to "float" above. It delineates the ceiling too starkly, IMHO. I am guessing that there is no closet in that room. Some tall free standing wall cabinets/shelves might be something to consider. It is often nice to keep kids toys with pieces together and/or displayed. A puzzle with a piece missing is just a piece of junk. A puzzle on a shelf in an inviting box is enticing. One good toy with all the pieces intact is much more valuable than that box of jumbled junk in the corner. I would offer you to consider a nice small table with a couple of chairs ( not a kids table) for doing things such as play doh and holiday cookies, crafts, puzzles, board games, school projects and other such stuff. You need somewhere to sit in there and maybe a nice lamp. Perhaps a magnetic dry erase board on the wall might be in the future, and maybe some where to display the kids art. Perhaps you could create a reading/sitting area by putting in a window seat along the window. It does not have to be built in. It could be quite simple in design. You could put a comfy cushion on it and have storage under the bench. It sounds as if you may have decided not to use it as a dining room for a good long time, if ever. My advice would be to let that happen and go ahead and add pieces to the room that suit your needs. Yet I would advise you to not choose pieces that are strictly juvenile. Instead, choose pieces that will translate in the coming years. You can add juvenile elements with the cushion fabric and maybe a nice little valence on the window. Add that element with the things that are easily replaced or removed as time goes on. You might want to consider taking out that ceiling fixture in there and replacing it with something much less dining room looking. Remember, the kids are only little for a few short years. Before you know it, that teddy bear will have waddled out the door, Thomas and his friends will have chugged on down the track, and those primary colors plastic shelfs and pastel shaded canvas boxes will be too babyish. Instead of a building things with a tower of soft blocks, they will be curled up on a cushion with their ipads watching Peppa Pig and the unboxing of an endless array of toys on YouTubeKids, until about the early teens, when they will hide behind their closed bedroom doors. Tall shelving Seating A table Neutral, non juvenile pieces That is my advice for your nice room And, this grandmother might add another word of advice. That would be to try to value quality over quantity. Our children are so overwhelmed with too much stuff, most of which has no real redeeming quality or value to it. I would advise you to seek quality in time and experiences with each other rather than the latest plastic licensed character toy. No Paw Patrol toy is ever going to replace that time spent together, or time spent with friends just imagining. I watched a couple of little boys outside in the cul de sac yesterday, playing. It is not as common as it once was to see kids actually outside riding bikes and playing. These little guys are about eight years old. They were pretending that they wiped out on their bikes and had to come and rescue each other. Had I not been watching them and knew that they were playing, I would have panicked to see the one laying in the middle of the road with his bike to the side. The only super heros in sight for them were each other as they came to each others aid. I am a baby boomer grandmother now and this is about the only way we played when I was young. We had no room full of toys or 24 hour media. My kids had not much growing up, either. Today kids just are over whelmed with stuff. Your room is nice. But, try to fill it with experiences, not an endless array of plastic junk. That tide of plastic junk will come rolling in the front door and out the back on it's way to a landfill. There is so much plastic junk being thrown out into the garbage because most of it is not recyclable. Mostly all it leaves behind for the child is a forgettable experience of opening the brightly printed box and taking it all out.

Indent/cut out space is 83”x29” ... We’d like to keep that space as much closed storage as possible. Found “expandable” pseudo-custom cabinetry here on Houzz that would work.