What a lovely room-- I can see why you'd want to spend more time there! Are you open to rearranging furniture? I'd float the sofa in front of window with the chair opposite.. then put the tv (assuming it's a large one) on the wall behind where the sofa is currently. I have my tv over the fireplace now and I hate it.. it's the best place for it but it completely sucks the charm out of the fireplace. And yes--it's too high. If you are thinking a smaller tv.. then you could probably keep your furniture arrangement and look for a small cabinet-- perhaps on rollers-- that would disguise the tv and allow it to be moved as needed. The shelves are a great spot for a smaller tv-- but I fear they are too far from the seating for comfortable viewing.

I wouldn't keep the color scheme, but I think I'd put the TV on the orange wall. The yellow wall would be better in a vacuum, with its high window, but the advantage of the orange is that you could probably arrange it so you can watch from the kitchen too, if so desired. I'd get a long console for underneath it, whether you intend to hang or stand it -- at least 50% bigger than the TV itself. (Not much clue to style here, so not sure what to recommend...) Then you can assemble your furniture to gather around the fireplace and TV -- large couch with back to kitchen, with arm chairs on either side facing in. End tables with lamps, a coffee table, etc.

I’d build a room over that great room in a heartbeat. Have you ever lived in a house with a two-story room like that? They are a pain in the ass to decorate and they screw up the heating and cooling of not only that room, but the upstairs, too. As for the fireplace placement, I’d move it to the side wall, like you’ve shown in your photoshopped pics, regardless of whether or not I was keeping it as a two-story room. :) Edit: Actually, I forgot to take the size of the tv into account when I made my earlier recommendation. A 70” tv might dwarf the fireplace over which it’s placed, but I think I’m definitely against the drawing you have with the tv between the windows; I’d probably put it on the short wall where you can see it from the kitchen AND so it’s not the first thing you see when you walk in the front door!

I would keep this basic arrangement with a few changes: 1. Whatever is in front of the fireplace needs to go. 2. Move the tree someplace other than this room. 3. Put the two red chairs together in front of the railing and send the recliner to another room. 4. Get matching floor to ceiling curtains for all windows in this space. 5. Get a rug large enough to hold all front feet of the sofa and chairs. 6. Replace the current console with a longer one that spans nearly the width from fireplace to wall and is no higher than the one you have now.