Many of the small house designs of the 20s-30s are wonderful lesson in how to live well and still live small. There are many books and web sites with lots of these plans. They make wonderful looking. In your case, however, you are trying to fit and retrofit a "lot" into a "little"--25 pounds into a 10-pound box! For example, I believe the original house has one small bathroom on the second floor serving three bedrooms. Probably not a desirable 2016 solution, but there's little available room for a second bath. The adjacencies, sizes and locations of the rooms in your first floor sketch plan really don't work very well. As others have suggested, it really takes some creativity and experience to design small well. Anyone can design a large house, but a small one takes so much more ability. Do you have the land for your proposed new house? Or you trying to design something which will fit "anywhere"? It seems, from your description, that the new design must be organized and positioned in a certain way, but it's unclear why. My recommendation is to stop trying to design a "solution", and make two lists: 1) Must haves; 2) Like to haves. Gather some photos of the architectural character and features which are appealing to you. Thereafter, find an experienced and creative architect or other professional in the single home business and ask them to meet with your for a 2-3 hour design "charrette", to explore design concepts and options which can then be used as the basis for preparation of full design and construction drawings and specifications. Until you have the design concept worked out and confirmed for your specific site, none of the hypothetical plan sketches have much meaning. Good luck with your project.

@hiccup4 What is your vision for the room? What is its purpose? Traffic pattern, future furniture layout? Is the actual room open to the other spaces? How light or dark is it? Any architectural features? Your space above is pretty and transitional in nature w/great light, is that the mood and colourway you want to carry through? Or maybe you want a departure? Your rug choice is informed by all these questions. Any one of which will set a tone for the overall room. Make a mood board. Put a lot of your detailed choices on it. And a budget for the room. Collect pictures of rooms you love (and hate) with big brown leather Chesterfields. Doing all that will actually prove helpful. Way more helpful than rugs I would choose without knowing. edit: @hiccup4 Sorry I got you confused with the OP! Are you asking if that blue sofa on your sketchbook is a saturated colour? It is,just one with a lot of grey in it. (on my monitor)

1) your fireplace brick is pretty shallow -- maybe 4-6" deeper than the wall? any cabinetry or console you would put on either side would be 12" or 24" deep, which might look very odd. 2) when you remove a lot of the kitchen wall, where are you putting the couch? or is the whole room being rearranged? 3) agree that art should be lower over couch, and also that it should be narrower than the couch itself. thus, you might want two rows centered on the couch rather than the single wide/high row. 4) we could use a view of the end of the room to the left of the fireplace -- for example, is there anything behind the chair?

I remove that mantel first thing. It is an add one and it doesn't fit, doesn't belong...seller must have thought it was "staging". Without it, you are able to design the abutting walls. Shelves mean adding things. I am not good at that...it looks easy when you see examples of odds and ends looking great, but it takes some doing and some money to make it work well. What about art, instead?