Thanks everyone - much more to ponder here. @roarah, I think almost any sofa direction is going to entail a big ottoman. I've avoided it to date because the kids use the coffee table for so much coloring/lego building/etc (which explains why it needs replacing) but if I replace the sectional with anything other than another sectional, I'll definitely want to try a big cushy ottoman. @Beverly27 and @bac717, I like this idea and need to play with it some more. The difficulty is that there is a 4ft wide window on that wall. There would still be enough space to place the TV between the window and the door, but there tends to be a pretty bright glare from the window itself. (That may change within the next few weeks, when the house under construction next door gets its upper floors, sigh.) It's worth shifting the furniture around to see if it might work! My husband is out of town for the next couple of days - time for some experimentation! @suero - the U-shaped sectional is a really interesting idea. I need to hunt around the web to see if I can find something like that...it would eliminate all the battles for prime TV watching seats. @jlc712, I realize I hadn't posted a proper diagram or clear photos; all these are old blurry cell shots in my photobucket library. I'll try for something better after work, but the entry to the dining room is on the same wall where the TV/"fireplace" is currently situated - directly opposite the exterior door. @kidrowlam, the one thing that is staying in the room for the foreseeable future is the Persian rug - it was a wedding gift from my MIL (and we have no other place for it!) The faux fireplace is in the first photo in my first post, under the TV. I'm totally ready to junk it if I can improve the space.... Thanks everyone - I'll try some of these ideas tonight/tomorrow!

Sorry, Kim, I was typing at the same time you were, but that arrangement that you have now, is what I suggested below. I really like it. if that wood piece needs to be there, can you put your TV on the long wall where your couch is, put couch in front of windows and chair on the right side of your couch as you are looking at it. May even have room for another chair.....with end tables, coffee table and lamps your room will look good. I assume you will be putting some sort of curtain/drape on the windows. Your floors look very nice and a rug in front of the couch would give it some color.

You don't really need a coffee table, since you have the side tables. Just tuck a c table under the side of the couch where there is none. That should free up some space. Since you want to put a unit where the chairs are, the chairs will have to be relocated. Even with your two couches and chairs, you only have eight seats. Add more with poofs or ottomans. Relocate the two chairs in front of the fireplace (with their backs to the fireplace). Or as suggested, move the couch that's in front of the window to face the other couch. Then the chairs can go in front of the window. I agree with art going around the tv.

You might consider moving your TV/console to the small wall and then getting a larger sectional for the room. Below are a few ideas from designs we have done that might help you further.