I know very little about this sort of thing, but if it were mine, I wouldn't make it rectangular, I'd keep the top arched but straighten the sides. I also think it would be worthwhile to sandblast off the paint if you are going to tile over it. It's very messy, but you should be able to rent the equipment for a reasonable sum [compared to having the face fall off during Christmas dinner].

Why not? I've certainly seen it. I think if you do do this, you should consider putting a floor level tile or brick paver (if you can match) hearth instead of running wood all the way. Technically it WILL work. It has been done. It will save you that space.The raised-fireplace-sans-hearth thing may be not the best aesthetic chioce for your room/ brick fireplace/ architecture. I'd think about how it'd look w/ some changes- consider maybe replacing the fireplace screen and/or finishing around the screen w/ some kind of detail- inset rock or tile maybe. It's hard to say without looking at the fireplace in relation to your living space.

Oh man! I truly love it. Smart, yet comfy and lived in. I wish you could get her to take pics of the furniture that you mentioned so you could post them. That's the look I love and aspire to but haven't pulled it off very well yet. LOL I bought new LR furniture but it's still sitting in the garage unpacked. We are having problems with the new fireplace and can't paint until that is corrected and the furnace ductwork cleaned out. Her accessories are great!

Why are you putting in a gas insert? why not just leave what you have and do a gas log? the bricks in the arch are supporting bricks for the rest of the structure instead of screwing w/the bricks, remove the whole thing and do your insert, surround it w/something diff modifying the arch and sticking in something different isn't the best option. (is a fisheye lens all you have??)