The plan separates each living space with access from a central hall. It would work well for an office building but not so much for a house especially f you plan to entertain. I find that trying to make a good plan out of a bad one is usually a waste of time and effort. Its like renovating a house that hasn't been built yet. Decide what you think an entertainment space should look like and develop the house around it. But I would not design a house around an occasional use. The interrelationships of family members should be the dominant theme of a house. And I would never put a level change in a living space unless there was an alternate wheelchair route. If you plan to entertain, the front door should have wheelchair access too. An accessible half bath would be good too.

I agree with CDR's thoughts on furniture placement. You could use a linear electric fireplace like this with the t.v. mounted above it. I think they're much nicer looking than something with a mantle. It's clean and modern looking. Just be sure the fireplace is longer than the t.v. or it will look out of balance. If you put a sofa table behind the sofa in the bay window, it will keep the sofa pulled away from the baseboard heaters well enough for the heat to circulate. Then you can add a couple of lamps for ambient lighting. Two chairs (swivel are nice for going between conversation and t.v. watching) with a table between them for drinks and an area rug to pull it all together. You'll want to add art where the candle holder is on the wall I think, to add some life and color to the space. Keep the furniture smaller and with feet so it doesn't overwhelm the smaller space.

Wall opposite window - brown door (will be white) - leads to utility room/garage.

Good morning Jalpa, May I be direct about the furniture placement? I do not want to offend. Please do not purchase a theater chair or three seater couch. If you really do want to open up the room, add comfortable seating, accessibility and aesthetics to your room then I suggest that you get 2 recliner or regular love seats. The larger furniture limits your TV viewing and crowds the room. If it was me I would replace the sectional with 2 comfy love seats. I would put them in the corners and have the tv on the stair wall. I know that the furniture store wanted to give you a deal but honestly your comfort and overall happiness in your living room for years to come is well worth the money spent to put the right furniture in your living room. So whether you get love seats with recliners in them or love seats that you can add ottomans to them; I ask you sincerely; Please do NOT get a 3 seater couch nor a theater love seat. Theater love seats confine you to only two people whereas a regular (even with a recliner in it) love seat makes it possible for 2 to 3 people to sit in them and one person to lay down in them. Forgive me for my boldness but the sectional and any 3 seater couch will close off and overwhelm your living room. Please get 2 love seats for your living room. I sincerely believe that you will be happier in the long run. Also, the one love seat that is in the furniture store would not go well with your sectional. When furniture does not match it really t akes away from the beauty of the room. The first one is from HOUZZ. The second one is from Shields Reclining 68" Pillow Top Arm Loveseat at wayfair https://www.wayfair.com/furniture/pdp/palliser-furniture-shields-reclining-68-pillow-top-arm-loveseat-paf8589.html?piid=27367354%2C27374487 [houzz=https://www.houzz.com/products/medora-manual-double-reclining-loveseat-prvw-vr~154549915]