Thanks everyone for your suggestions. I really love that photo, tibbrix, and I did wonder about moving the TV over in that corner. Hate to block a window, though. As for the rest of you, I agree about not being married to these sofas. We had actually started out with some darker green clean-lined sofas that were beautiful (from Crate and Barrel), but the cushions started sinking just a few months after purchase. They let us exchange for these, but I've never liked them--completely different style and not the color I wanted. So going with an even lighter green may indeed drive me nuts. I really wanted a pattern this time around too. What's important to my physical health is to have a sofa that sits high and is firm. (Arthritis in knees and back trouble.) I'm going to contact the manufacturer of this sofa and ask where we can purchase one custom. But what I do remember about them is that they only have this 84" sofa and then a very small loveseat--smaller than our current loveseat. We'd probably have to throw a chair in somehow. BUT I do wish I could get my husband to help me move those bookcases to either side of the TV to see how they would look. It would be a big job, but there's only one way to find out how it would work... The salesman has ONE blue sofa (I never considered blue EVER so have to wrap my mind around that--the rug would have to go). It's firm but doesn't sit as high as the celery sofa. He suggested getting 2 chairs with a table between to be in place of the loveseat. Where would we put lighting for the sofa, though? It would look odd to have table in the corner between the sofa and first chair and then another table in between the 2 chairs. But honestly, my first thought when I saw these was "old-fashioned." On the other hand, we probably can't afford the style I'd really like. Sorry for rambling...

This is a beautiful, charming home. If you start in the living room, you would first decide what would be the focal point -- which is obviously the fireplace. So your seating would center around it. The opposite side of the room could be used for additional seating. Leave the arch as is. It is integral to the architecture of the house. Remove the wallpaper -- and I would absolutely paint both rooms the same. You have a lot of ideas and I would suggest you first do electrical update, install new windows. I would also recommend that if you replace one window, you do them all the same. Otherwise, your new home will look disjointed and it will effect the value of your property. Sometimes one can be overwhelmed thinking everything has to be done now. Take your time and enjoy your beautiful new home.

@Patricia, you have a good point. I think I will definitely want to consult a designer to get their perspective from an aesthetics/space usage mindset. I do have a large media room in the lower level where my big screen is, so I figure if I ever have a large group to watch a game, etc., that is likely where I will need the most seating. The upstairs could then be used more generally for entertaining. My dining table seats 10 and moving it into living area would allow me to add chairs on either end. The addition of a 9-10’ Island would add seating as well. At worst, the family in its current footprint could snugly fit a ~6-7 person sectional and a chair. I think with an additional ~2-3’ feet in length and width, I should easily be able to fit a sectional in there as well as 1-2 accent chairs. Plus if I’m entertaining there would be plenty of space to gather at the end of the kitchen where the new bar would be. These pictures are not by any means exactly what I would do (I used a trial version and stock colors/cabinets), but should help give a sense of layout.

Giavanna, I think your best best is to first settle on a look you're going for. Go through Houzz photos (do a search on Open concept living rooms) and create an ideabook of things you like. Do you like modern styles? Traditional styles? It looks like you have kids, so family friendly will likely be important. I think we need a bit more to go on before we can give you good advice.