I'd try to tap off the hearth.

Parge over the raw edge and paint it all the color of the wall

...once you see what you have, you may take it all out.

Would trying to remove the mantle be a bad idea?

if you remove it, youre going to have to fix the stucco/smooth coat. it's possible, but you wouldn't be able to match the color.

if you remove it, be prepared to basically patch, smooth and repaint the entire thing.

if you removed the hearth tile and stucco coated it,,,,,

you could have something like this

you could remove the tile in the middle of it, replace it w/something else, or inset some wood into it. Ditto the hearth. you could replace it w/diff tile, a large piece of stone (basalt would be nice) or something else.

if you removed all the tile, the mantel piece, did a new smooth coat, you'd basically get this look

Are you sticking w/the southwestern style in the home?

this is cool

so is this

Thanks Beth! We are kind of going for an updated more modern Hacienda look. Trying to lean a bit more to Spanish than Mexican. It’s fine to stucco, paint and/or re-tile. The spot lights are being removed and the room will be painted. I am trying to avoid completely demoing this thing and replacing it. Even the chimney is masonry. It would be a solid 15k to have a different fireplace in the same location. I have never had anything like this before and was wondering if removing some of these masonry aspects are even feasible without messing up the rest of the fireplace.

It may be huge, but it's very cool.

It's so cool.
I'd add a lighter stone to the mantle and hearth. Making it more muted.
Or
If those are terracotta tiles try white washing them.

then just remove the mantel, patch, stucco, smooth it out and paint. shouldn't be that difficult or too expensive to do.

maybe redo the hearth in some handmade spanish tiles, and the stucco in a nice white.

maybe something on this order

with some spanish type of tile

if you're redoing everything, you could also redo all the tile

then you could do the room similar to this. that wood ceiling or beams is a must. love all the creamy white w/the soft blue doors

or maybe like this. I added some wood on the ceiling in both photos

love the black and white too

I too think it's cool. Then again, this style is among my faves and I have always admired a kiva fireplace.

Very cool fireplace. I think the mantle makes it very interesting. The hearth is quite large but if you reduced it or removed it, would the fireplace look disproportionate? Hard to tell without seeing it in place.

I'm guessing the flooring doesn't extend beneath the fireplace, so if you remove the hearth be prepared to address the missing flooring and another cost.

Its lines are simple. Very nice.

Adding additional photos of the room for perspective. We moved in last August and have been waiting on bids for this huge house remodel. I didn’t want to waste any resources so we have been living like frat boys. 😬 We are moving a wall at the bed end of the room to give us another 5 feet. The window near the bed will be a French door. The side of the room the fireplace is on can be seen from the hallway. That side of the room is smaller than the side the bed is on due to the exterior wall to the courtyard.

It will also cost 20k to raise the ceiling so that is deferred for now.

From a photo, seems large for bedroom- and so your 5 feet addition! But it goes so well, and accent wall and other decorative detractions will make it 'visually busy'. The fp/ terra cotta can be such a "star" here.

Seen black and white neutrals with terra cotta? transitional/ contemporary nice. Browse houzz photos and there are lots of ideas, and save them to your ideabooks.

Or like narrow mantel, can add narrow legs and lines -

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Modern type platform bed would suit fp and --

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It does look big relative to the rest of the room. Since you're expanding and likely changing out the floor, I'd make the hearth a lot smaller or no hearth if the flooring you're putting in will suffice for code.

I suppose a small thing, but with fp and then new french doors - a 'heavy visual' weight on that side of the room. Any chance the other window could be opened/ converted to doors?

The window near the bed will be French doors. I can’t convert the other one as there are French doors about 6 feet away on that same wall.

Amazing how the hearth now looks completely proportional now. Very well done, thanks for the followup.