I think it could be both, but if you had to choose (and I've had to in the last place and this one, ) I would make sure I had a place to store a vacuum cleaner and broom and such, as well as outdoor boots, shoes and umbrellas. We accommodated pretty easily to keeping our coats upstairs, but it's a pain to have to store the vacuum, brooms and such far away from where you use them, or outdoor boots and such far from the front door, and the only alternative is to leave them out in plain view.

Our 'entryway' is our enclosed porch. The floor is wood. I just refinished it last summer and by this, it's already showing signs of wear by the outside front door. My sister has slate in the small area by her front door--it looks nice and really saves the floor. A bakery I used to work with installed a really good, heavy-duty wood floor in the store. It was supposed to last them for 'forever'. within months it was virtually ruined by the traffic coming and going. There's no way, if I had the choice, I'd have wood by a well-used door. Unfortunately, given the configuration of our porch floor, we can't put in anything that adds even a fraction of an inch in height, so tile, carpeting, even a throw rug are out.

OK, so I confess--I'm captivated by this problem. I spent my evening commute thinking of you and your tiny entryway and your shoes. The slimmest possible profile would be shoe pockets. You could do the tension-rod thing up near the ceiling, and use a chain or cord to hang the pockets. Then anchor the thing at the bottom by staple-gunning it to the wooden baseboard (even if you rent--covering the hole in the baseboard will be easy to do when you move out). What if you relied on shoe pockets, but cut them in half, to be two pockets wide? Get a seamstress to sew the extra pockets on at the top or bottom, and remake the two bottom-most pockets to be taller for the boots to go in sideways (one boot per pocket)? And dye the entire thing maroon or red-orange to blend in with the wall better. (Since I sew, if it were my problem, I'd make my own set of shoe pockets, and make the pockets taller so that they cover more of the shoe, and put elastic in the top hem of the pocket to pull the extra fabric back in so the shoe doesn't flop out into the space.) And anchored the pockets to the baseboard at the bottom (you can fill in nail holes on woodwork pretty easily, so you could do this even if you're renting). If you wanted a curtain, you could cut a piece of wood to attach a curtain rod to (they make curtain rods that stick out 3" or 4"; that's what I'd get, and then you couldn't have very many lumps affecting the curtain or getting in the way when you moved it), and then sandwich the wood between the tension rod and the brick wall (put something rubbery or sandpapery on the back of the wood so it resists slipping against the brick). This would mean your curtain would be really tall, up to the ceiling (or wherever you decided to put the tension rods--flush against the ceiling would be least obtrusive) but that would sort of look neat. And you would need only a narrow curtain, so whatever you buy, you could cut in half vertically and sew end-to-end so you would probably have enough length Using curtain rings that slide easily would mean it's easy to pull the curtain back out of the way.

@Gcubed Living room serves as a large comfy space when we have lots of friends over. I was also thinking of splitting the space so that 1/3 of the space is a conference table. We have a dining room in the back connected to the kitchen. There's two side doors, one that opens into the kitchen and the other is near the staircase. None of those have a closet/mudroom functions. The basement has an entrance and I was going to make that the mudroom entrance because of the dogs. My husband likes to enter from the sides. I like to enter through the front door and hang up things. It would also be the entrance for guests so that's why I wanted a coat closet. @Lidia - Something like this?