"My plan of action is to sand the damaged part of the wall, fill in the divets left by the bubbles with some spackle, then prime and paint. " Good luch sanding aplastewr wall. Plaster is very hard and does not sand easily. It sounds more like the finish layer is popping off. Just remove it and apply a new finish layer. A bonding agent and some EasySand should restore it to original condition. For the wood remove anything loose and fill with Minwax High Performance Wood filler. Sand smooth and paint. If you do a good job the repair will be invisible under a new coat of paint.

I have a couple of rules of thumb, but within them, there's a vast variety of things you can do. First, look at the shape and size of the firebox and any tile or slate or stone around it, and consider replicating that, either with one mirror or picture, or a group of them, above your mantel shelf. Second, if you decide to go big, as long as the width of the piece is no wider than the underlying width of the mantelpiece itself, not including the overhang of the shelf, it will look fine. Use that same guideline when putting things like candlesticks and vases out to the sides of the shelf. They look best when they continue the line of the perceived support underneath the shelf...which might be corbels or pilasters or columns, or just the place where the load-bearing framing likely lies behind the wall surface. Imagine a plumb bob hanging right down the center line of that support, and center whatever thing sits on the shelf above it on that same vertical line. And finally, stand back, turn your back on it, whirl around and look at the whole composition, and trust your instinct if it says, "Ooops - too big" or "no - too fiddly" or "Skimpy!" My mother always said, after you are dressed to go out, turn your back to the full-length mirror, whirl around, and if anything catches your eye, take it off. Same deal.

The rug is from wayfair - 100 Percent wool and super soft!! But it was like having a house full of 10 white cats, oh my!! It’s much better now after about 6 months but for awhile I had to vacuum constantly. It’s worth it though for the price. I have a wool rug in our more formal Living room from a design store that costs over 3,000 and didn’t shed at all like this, but you get what you pay for and the quality of still very nice aside from initial shedding.

Think about furniture placement. You may not want to put the fireplace centered in the middle of the wall, as it appears your furniture won't be able to be centered in front of it. That bump with the 4' opening is for a door, I assume? Where does the door lead? You will need to leave that whole area along the stairs/living room wall open for a walkway (leaving 42-48" open along the wall would be ideal, IMO) to walk through the living room to the door. If you center the fireplace on the wall, the furniture facing it will need to be off center to account for the walkway. The window and door bump outs are going to be awkward to furnish/decorate around, I'm afraid. It looks like the fireplace wall is just under 17', but after accounting for leaving open space for the walkway, that gives you just under 13' wide of space to work with for arranging furniture in the 10' area (the length of wall with the 3 windows) in front of the fireplace. Or are you planning to put your couch/es in the area where the room widens (the second trio of bump out windows)? If so, how are you going to use the ~13x10' area in front of the fireplace?