Do you have kids living here??

Well, we're undecided on a TV up here. Three family members would vote yes, one votes no. Being a smaller bungalow, one thought is to NOT have a TV on this floor; knowing the family, it would be on a good part of the time, at least for someone watching. So always noise that would carry everywhere in the updated space, would take it over, etc. So...........that's the state of things :-)

yes, 16 year old and 8 year old

Long narrow rooms need to be subdivided. I'd put the couch and main seating grouping down by the fireplace -- you can put a TV on the wall to the left, although that will limit you to an L-shaped seating arrangement. Let the couch have its back to the rest of the room, if that works best -- you can always put a narrow sofa table behind it if you want to soften the effect. Add a rug there to help define the space, and coffee table, lamps, etc.

Then the end where you currently have the couch can go a number of ways. It could be a couple of chairs and a bookcase, as a little reading/hangout space, or you could put a bench and coat tree to have a bit of an entry area, and/or you could put a game table with a grouping of chairs, if you could use a space like that, or maybe 3-4 chairs around a lower table as a different kind of conversational area. Or you could put a desk here for an office space, with an extra arm chair nearby. etc. Only you know what the rest of your house is like and thus what functionality would be most useful.

I agree with ACM.

I like so many things about your rooms, especially built-ins, trim and windows. The paint color - trim and walls - really enhance the rooms. The advice above is great.

I suggest you make a cozy sitting area with a grouping of 4 armchairs and a round coffee table in front of the fireplace;

http://www.ikea.com/us/en/catalog/products/S69191709/

What a gorgeous bungalow! I love the details.

I really like the idea of 4 armchairs around a coffee table by the fireplace, if you don't want a tv in the area.

If you do, you could find armchairs on casters, so they could be easily turned to watch tv (placed on the open wall, not above the beautiful fireplace). Given the ages of your children, would they prefer their own chair/space compared to sitting beside each other on another sofa?

Great ideas, thank you! We can take our dining room chairs and at least use those to mock up a few options like you suggested. Swivel chairs are certainly fun an versatile......appreciate all the input

I like the idea of leaving your sectional where it is & putting chairs with a round table down by the FP. Could be very cozy for reading or playing games. Again, I love your home!

Does it function well? I think it would be more comfortable with two separate spaces, each with their own rug. Maybe one area more for sitting and one for working/creating?