You need to check code. When we re-did our fireplace and put gas logs in, we needed to have 12" of non-combustible material on either side of the firebox before we hit the wall/surround. Check to see if that's the current code. For our new build, I talked with the manager of a fireplace store. He told me to bring my plans in with the dimensions of the room to help determine the right size of the fire box and thus the size of the fireplaces for the spaces. They know what "feels" right and what would look too small in the space.

I made version of one to ceiling that's more narrow and it looks better, thank you! The windows are now more centered, with more space between them and fireplace. True about window treatment - I actually plan on using them but easier to measure diagrams with windows exposed. Thank you both for your insight!

I'm in agreement with those saying this shouldn't be a deal breaker but to answer your original question of " Should we remove the excess rock surrounding a typical fireplace dimension, or would it be better to frame and drywall to hide that same excess.",depend's on existing conditions. "IF"the stone is as massive as it appears,which I seriously doupt,you might be better off removeing the excess rather than covering it. Here's the logic behind what I'm suggesting. I strongly suspect what look's like a stone fireplace is either flagstone or a faux man made product. In either case the total weight of fireplace is no where near that of laid up stone and there's little extra foundation beneath it. In the intrest of simplicity and conservation of labor,I would cover that which I considered excess rather than removal. "IF"it is indeed laid up stone,I would have an expert evaluate foundation below as well as soil stability on the lot. If there was any possibility of ground shifting in later years,removing unnecessary weight could possibly prevent shifting and expensive repairs.

All of the house is getting new flooring. The walnut walls are staying the same. The dining and kitchen are going to be enlarged. The exterior is getting a garage, a covered entry and covered patio. The living room is going to be our only TV room. It’s getting a fireplace make over, new flooring and new furniture.