The higher end fake grass substitutes are not cheap to install either... I'd suggest that bark mulch is the most practical, and if you lay it over compacted earth sloped to drain as if for a patio, with weed fabric on top and 3 to 5 inches of bark it should work fine. You will have the incidental bark mulch getting tracked into the house, depending on the coarseness of bark you choose. You probably will only need to top of with new every other year or so. If this mulch is in a full sun location, no need to worry about mold, unless it doesn't drain well.

Pottery Barn has sofas with indoor-outdoor Sunbrella fabric, https://www.potterybarn.com/shop/new/sunbrella-feature I second those who've suggested starting good habits while kids are young -- teach them from the start how to treat furniture and the family belongings properly. And this is the time to start with rules like "no food or drinks in the living/family room"; and yes, it's perfectly fair to have one rule for the adults and another for the kids. Or you can limit what kind of food and drinks to allow kids -- when mine were young, it was water or apple juice only for them in the living room, no milk or grape/orange juice. Also, they grow fast : ) , so you don't really have to decorate around them too much (round ottomans vs. wood rectangular coffee table). I'd decorate for the room and with what you like. Buy quality the first time around. The arched fronts might be fairly easily removable. And I'd almost be tempted to have the builder drywall over the shelving above the arches.

Yeah, something nice and boxy usually works well for slipcovering, but some covers are more tailored than others. I'd get a high end fabric underneath, in the hopes that some day it could be free. But it would have to be fairly neutral, especially since you want it to last. I hate sofa shopping so it darn well has to be timeless! If not slipcovering, I like leather because it can usually be wiped clean. I don't know where leather fits in on the eco-friendly scale, but GOOD leather lasts a long time and sometimes the most eco-friendly thing to do is replace things less often. I'd ask at the home decorating forum about fabric choices, too. Very helpful and knowledgeable folks there. http://ths.gardenweb.com/forums/decor

Budget aside, Flexsteel Digby with Kashmira fabric. Looks like leather or suede, depending on your preference, lots and lots of gorgeous colors. You could run a tractor one this material and it will still look brand new. BYE, only Flexsteel has access to Kashmira. Worth every penny, as you will have the furniture and fabric when the kids graduate from college. https://www.flexsteel.com/content/explore-kashmira-performance-fabrics