Since you are remodeling, the ideal thing would be take part of the dining room and turn it into the sitting area, but move the wall, so the light blue area becomes big enough to be a nice sized dining room. The smaller area that is left of the original dining room, would be perfect for watching tv, and your dining room, would be closer to the kitchen, and be far more practical.

Thanks, Cat! I can't quite picture what you are suggesting. Which wall is it you say we should move?

And I should explain, because of plumbing, the walls around the powder room cannot be moved. The wall in the lower right of the drawing (the wall that opens into the current dining area) is the wall that stands between the dining area and the front hallway, and it can't be taken down.

Also, we have 2 sliding glass doors that do not show up on this drawing (sorry) and one is on the left wall at the end of the kitchen and one is on the right wall at the end of the current dining area.

Do you still think that we can do what you suggest? And if so, I'm VERY interested, and may I ask you to please explain your idea a bit more so I can visualize it. Thanks!

A lot of design shows are going with a fixed banquet bench (where your tv is currently mounted) and then the table with chairs on 3 sides or just two sides. 
How many people are you trying to feed and do you feed more seating at times?
I would definitely swap the two areas.

The wall, that I would move would be the wall on the dining room side. It just makes more sense, to have the tv area away from the kitchen, and the dining room, to be closer to the kitchen. You can leave the bathroom walls in tact.

Lisa T, We are just two people so adding a small table against a wall is a great idea! And, if we place the table against the wall where the chairs are in the drawing above, we get amazing space utilization (even better than if we place the table on opposite wall where the TV is in the drawing).

Below are photos how new arrangement works in dining area and in adjacent living and kitchen areas. You have to use your imagination!

PHOTO #1 BELOW:

• In photo, I am trying to show HALF of a table for 2. Other half will go where counter is. This will center table along wall in back of powder room (where chairs are in the current diagram). And, we will have plenty of clearance so can enter this space through doorway. We are removing the door so it will just be an opening and we will be able to walk into dining area and then on into kitchen area.
• A small table (2 feet 6 inches X 3 feet 6 inches) against the wall will seat 2.
• Move small table off the wall to seat 4.
• Move small table parallel to the wall and extend it with leaves to seat 6-8 (but will be a bit narrow, according to chart below from dimensions.com).

PHOTO #2 BELOW: Making change mentioned above, allows us to have more room for furniture in living area! We can have a couch in front of the sliding glass door and two chairs opposite TV to be mounted on wall.

PHOTO # 3 BELOW:

Please excuse the mess! I just want to show that our 194 inch wall with kitchen cabinets (shown in diagram) can now be extended by 36 inches of upper and lower cabinets and we will still have 6 feet of floorspace before we get to the chair that's closest to the dining/kitchen area!

We can use some of that 6 feet of floorspace between end of cabinets in kitchen/dining and chairs along wall in living area, and here's how:

1. Mark transition from wall of cabinets to dining/living space, at the very end of the row of cabinets, by adding a tall plant. That will take up, 2 feet of floor space.
2. We can put in a 36 inch cooktop in kitchen instead of a 30 inch one. This will move the wall of cabinetry 6 inches more toward living area.
3. We can add 9 inch pull out on each side of the cooktop (for frequently used spices and oils). This will move wall of cabinetry 18 inches more toward living area.

In TOTAL, after making above 3 changes, we are taking up total of 4 feet (2 + 1/2 + 1 1/2 = 4) of floor space along the wall. So we'll still have 2 feet of floorspace between the plant and the chair in the living area. And since it's a plant (and not a cabinet), it will feel like there's even more than 2 feet of space.

Note: I don't want to confuse things, but the diagram I shared above shows the wall of cabinets in kitchen as 12 inches longer than it really is. Since these calculations are based on this diagram, we really have 12 inches more of floorspace, and that means there 3 (not 2) feet of space between plant and the first chair. So we have a nice amount of space on floor.

Lisa T, wow, your comment came just at the right time! Thanks!

I took the last 6 hours or so, non-stop to figure this all out and write it up --and now I'm exhausted and hungry!

Would love to know what you all think! Do you see any issues??? Please don't hesitate to be critical. Thanks!!!