If any of you experts are still reading this- I just spoke with the contractor and he can knock down the foundation wall that returns at a perpendicular angle to the house. The garage and studio would then be a rectangle that bisects the breezeway cleanly at an angle. We could remove the roof return to the breezeway so it would be more like PPFs sketch without the green piece of wall. A bit of work but seems to solve many issues including a crammed exterior door in that location. The angular exterior space outside would return- but that seems less offensive then an asymmetrical garage. I lose some closet space on both floors but nothing major. Any thoughts on this?

Not sure how much you want to spend on the project but here is something to consider. Have a carpenter gut the bookshelves and build in a dresser on each side. It might feel like you are removing some of the character of the room, but you still have the unusual ceiling and the adorable window seat. Make the fronts for the drawers decorative with moldings and interesting pulls. With two dressers you would achieve more clothing storage, and if you had the top a bit lower than the molding there would be room for deco items. Then you could put your bed on the centered window with drapes on either side the width of the bed. You would also have room for two nightstands and access to each side. Nightstands with shelves would accommodate your books. I would also get a lower headboard. If you get a different bed the existing light fixture might work. I also like the idea of painting your ceiling the same color as the walls. If you think that might be too dark, paint it half strength. Alternatively, I would do what Lynartist suggested. Lamps, mirror, etc can come after furniture placement is decided. Good luck, it's a lovely room!

From this image, the sectional looks squashed in the corner, so you would give better balance to the room if you pulled it away from the window wall and put the floor lamp in the corner. Then you can center the sofa on the wall and add large scale art work. Often times it is best to "float" the furniture and get it away from the wall.

I agree that curtains are making the situation worse. They look pretty bad hung as they are, too low and too wide. Even if you raise them above the window, which would be better, but even then, they highlight the fact that the rod is not centered on the arch. I'd use just a shade the same color as wall (once it's painted the ceiling color). Then move the TV over to center of the blank wall.