We have a similar situation - kitchen with 8' ceiling open to great room with vaulted ceiling. I wanted 9' ceiling in the kitchen without sacrificing storage, so we put in a tray ceiling, with the area over the island recessed to 9'. In the recessed area we used Armstrong ceiling planks. They are available paint grade or stained. They attach easily with a clip system that was easy to install...nice for our DIY kitchen. This might work well for you!

I know you said you did not want to switch rooms; but since you like the look of the sink in the bay (the outside views are awesome), it may be worth exploring. If your DH is like mine, change is hard, but he comes around eventually. Perhaps posting another thread that asks people to weigh in on the two kitchen locations with a mock layout for each might get DH to consider the possibility if he can read what others have to say concerning the positives and negatives of each kitchen location. Many people are remodeling to get a larger kitchen space by eliminating two sit-down eating spaces in their homes. Thus, If you switch the rooms, I do not think you would have to “stage” a formal dining room if the time comes to sell. The larger, well designed kitchen would be a major selling point. Keeping the kitchen in its current location does not gain you a whole lot more space for the kitchen because of the traffic patterns; moving the kitchen to the dining area gains you much more kitchen space. You gain the space for family friendly island seating, and the kitchen does not have to be in a location that “fights” with the traffic patterns of your home. The generous dining space combined with the larger kitchen space would be awesome to entertain in. One negative would be carrying groceries a tad farther but not a whole lot more. ;

You've received some great suggestions. I think lighting is key. I would eliminate the bare bulb floor lamp by the fireplace and find some attractive lamps with shades. One for the console table, a floor lamp for the lounge chair and a table and lamp for the arm end of the sectional. I would budget to have an electrician come in and move the boob light in the dining room to center over the table once you've reduced its size. Change that to a lovely chandelier. If you can't afford all of that, you can swag a chandy from that connection to a more centered position as in the kitchen below.

I don't mind the current layout, but if I could change anything I would put the fridge where the pantry cupboard is now. I'd then place floor to ceiling cupboards on either side of the fireplace for storage. I'm not sure how you feel about bench seating but you could put bench seating with storage along the dining room wall.