Engineered wood and steel can span all kinds nds of distances. It isn't even that expensive. The labor is what isn't cheap. Contact a structural engineer if you haven't met the right contractor. 15-25K and you can have a second floor room. Pretty cheap construction, actually. Be careful what you wish for. Now all those windows will be too close to the floor to not get changed out to safety glass. And you'll need new electrical up there. Etc. Add another 5-10K for associated scope screep.

I very much like Beverly's 2nd photo of the mantle that extends perhaps 6 feet on either side of the FP opening, with shelving below on each side. It's dramatic and lovely. Back to landrstein's question about the 5.5' and 12'height dimensions that I suggested might be possibilities for the double mantles I was envisioning, those dimensions were for how far above the floor they would be, not how wide they would be. It would be good if you could get a designer to draw to scale what you want it to look like. It's important that you and the contractor are on the same page, and drawings will help you get there.

I can see option 2 working the best, but hopefully there is some flexibility at this point. Consider improved functionality, as well as (eventual) resale. You can gain a wider area between kitchen/seating area by changing the opening on lower right to be near kitchen. Now seating area can be moved down! Suggest an island (longer than peninsula if possible) to gain access on both sides, added storage, wider if possible for better entertaining (ie: buffet). I’d move sink/dishwasher to be near dish storage and to keep island/peninsula clear. People will gravite here. A focal wall with built in electric fireplace would feel spacious, be a great feature in your open concept, and keep that space uninterrupted to get to opposite side of room. Opposite wall idea. There is a lot to consider and thinking about overall functionality is key before furniture placement. Hopefully you have a floor plan with exact dimensions, structural components and space requirements to make the best decisions. Good luck.

@suzanne_m, Never heard of not being able to add sq/ft within an existing structure. What they probably mean is that by adding walls/floors you will be increasing sq.ft. and your tax bill will increase too ... and probably by more than the extra sq.ft would suggest! Maybe they mean you can't add more bedroom due to specific septic requirements, but a loft or upstairs family room shouldn't be a problem. Most likely there is also a minimum height for each space when splitting a 2-story space.