I am dealing with tile size and proportion with my small fireplace now. I would strongly suggest mocking both sizes up in person. I predict the answer will be clear to you immediately if you do that. Tile that is too big for a small space can look really weird because only a few tiles cover the whole space. There isn't enough tile repetition for it to look right. You could continue your counter top material up just behind the sink to take care of the window issue. Like this:

I think that rug makes the room look smaller. Either no rug or a rug that fills the room would be my choice. I think, also, remove that table from the window area and put a little round side table (if you need one) out of sight between the chair and the window wall (okay--one for each chair, if you need it). I have these little 12" diameter tables that are perfect for putting a drink on and take up little space. I think some nice, colorful drapes/curtain panels and coordinating accent pillows on the chairs would be great. The goal would not be to COVER the windows, but to draw attention to them (they are great windows!). It sounds like your goal is to be able to seat a bunch of folks for gatherings in the that room or not? What is the main goal of the room?

Wow guys thank you so much for all the help! I am amazed by so many cool ideas! I don know how to reply each one of you so here it go: - Marcie: I live in The Netherlands. Usually the city houses here are quite compact. My house is an exception for being even smaller because it’s located in a historical centenary building, they had to preserve it as it is. I really love your idea of changing the complete layout of the square space. Never thought about it! but will give it a try. The only problem with the couch facing the window is that we are planning on buying a beamer and therefore we need a blank wall to project It. - Decoenthusiast: unfortunately we don’t that much bedroom space. We have half of the floor upstairs just enough for the bed and a closet, also the ceiling upstairs is very low so we can’t go crazy with shelves and stuff. We definitely do have bikes but here in the Netherlands they have a special storage in the building :) - Tangerinedoor: yes I absolutely love Ikea if I need practical and modern solution. I also do love vintage, that’s why almost everything in my loft is bought second hand. I was thinking about what could I buy or make to be multiple functional as you said. It’s quite a challenge but with a lot of planning I can get there. I really wanted to find or make a narrow dinning table that I could use as a counter top since my kitchen sink top is so small I miss some extra space to work. But it’s quite hard to find these perfect made solutions, I feel like I have to make myself most of the things I want. About the couch, I have now a 3 seat Ikea couch positioned on the left side wall (where was the wallpaper) because I need the white wall in front of me to project the beamer (this is my ”tv”). I’ve read that to avoid echo it’s nice to have rugs in the house but like you said, my rustic wooden floor is so pretty I don’t want to hide it. Plus it’s one less thing to worry to clean or vacuum. I love plants and I already put them everywhere in the house 😃 Thank you again everyone for all the tips! I will return to show the results... Caroline.

This is a 7' x 7' area rug. Another trick is to replace your window treatments and rod. Install a new rod, higher and wall to wall. Purchase an extra wide panel and stack it back over the wall right side of window. It will make the room look wider.