If you're willing to change the furniture, something lighter like some of the examples above would look so nice. Frankly I prefer the softer rolled arms because they're so comfortable and allow you to lounge around in several different positions, put your legs up on them, etc. Comfort first, I always say.

Hey Mikeala, while you may have to make some compromises due to space restrictions, you can definitely fit a compact couch in the room. As @mindshift recommends, it would a good idea to keep all your furniture compact and as small as possible. I've made a couple of options for you here. (All dimensions are approximated from the images you have posted) For the first layout, I've eliminated the coffee table and added a slim console by the entrance, a wall mounted TV and an end table. You could also buy nested tables so you could stack them when they aren't being used. For the area by the staircase, I've added a tall bookcase and a couple of chairs for extra seating. adding a mirror would give a sense of a larger space, I've styled this room with modern furniture with a touch of hollywood glam. For the second option, the entrance is more open although the TV unit has been placed on the large wall. This allows TV viewing from both seating areas and yet separates the space. You may prefer this layout if you don't like the idea of having a living right at the entrance. I've styled this room with Scandinavian furniture. Do send us measurements and photos so we could further customize these for you. You could also add/ swap furniture and make your own layouts here.

I like your current arrangement. For more seating, you can use two longer sofas in the same arrangement. Or a sofa with two chairs as you have it but without the ottomans. That leaves room for a backless bench type of seating to face into the conversation area that wouldn't interfere with the TV. With any options, your seating area is rectangular, so a rug would be fine to use. You may have room for a narrow console table behind the sofa facing the tv, if you place a sofa there.

Get out the painter's tape and tape out a rug like this on the floor. It should be a minimum of 12" from the hearth and I like them to slip under the front 1/3 - 1/2 of the sofa. Things look more grounded if the rug extends past the ends of the sofa by a foot or more. Tape that out. Take a new photo and let's see what standard rug size is closest to your measurements.