Have you thought about creating a storage room beside the laundry room, although likely you don't need it to be as large as the laundry room? That way you could have out of sight storage for items such as decorations, camping gear, etc. I'm not sure I would want utility storage mixed up with my kids toys. I think then that your area would feel more like a family room. There is great toy storage in the picture you posted, much more that you would have with floating shelves. Looking ahead to when your kids are older and you cut down on the toys, perhaps consider buying units that have doors on the bottom 2 cubbies. Or purchase the doors now so that they match and add them later. This may help the room grow with your family over the years. One more thought. I like the idea of using the large area at the bottom of the stairs for family room / tv watching / computer area and keeping all the toys in the back area, perhaps with 3 sided shelving and play space in the middle. That way, again it would feel more like a family room where some folks can watch tv a little separate from the kiddies who want to play, but you can all be together in the same level of the home. Enjoy having more space to spread out!

A sectional can work there. I would do the ottoman though not the built in chaise.

I would suggest two large rugs. They can be identical, but it's not necessary. Just keep them in the same color family. I can't imaging needing those monstrosities in a house. Everyone will have hearing loss. They seem more appropriate for a concert venue. If hubby won't sell them and buy something smaller, can they at least be pushed back towards the corners?

Again, you could fill almost half of the fireplace area with window bench, game table and chairs like here ...? The walk-through function has essentially decreased the size of that area- and fp is to the side also - I think furniture or most of it can be in front of fp, and the window. A 'wall' might start with drywall to right of window - or measurement at which fp is [from window wall].