I don't see how putting a sofa facing the DR and the TV on the wall segment between them allows for decent viewing. I see your two options as (1) putting the TV in the corner (not necessarily on the diagonal -- a 65" TV is generally a little less than 60" wide -- doesn't leave a lot of space, but it can be placed flat) or (2) putting the TV on the wall between the window and the DR and floating a sofa opposite the TV and in front of the stairwell wall with a walkway behind it. I would probably use a sofa or sectional facing the sliders with the TV in the corner and a console or sofa table along the back of the sofa to give a landing spot for the DR and a transition between the rooms (most sofa backs just aren't that special base for a reading lamp too). You say you lean contemporary and the space in that corner is limited, so I would consider a non-traditional option for the TV console. This one is a lot less bulky than a traditional cabinet. It could place the TV flat or angled a bit without being obtrusive. We have a FR with an open end and lots of doors and windows like yours and the only real solution for us was to put the TV in the corner. We had a cabinet for a long time and more recently got the easel (ours is the black, which is a stain so you see grain and it comes off more charcoal than heavy black like a painted finish would be). I am so much happier with it. The components all sit on the bottom, we got charcoal grey flannel baskets for the rest of the shelf space and a cord storage box to contain the power strip, plugs and help control the cords. Once you get decide on the TV and sofa placement, the rest will fall into place.

One idea might be to add a very short wall on the left as you enter the living room so the opening to the living room is the same width as the entry ... and, by doing that you could put wall to wall built ins on that end of the living area, with or without a tv, and still create two separate sitting areas. I don't understand the "bar" against the solid wall behind the pantry and refrigerator. If you changed the pantry to a "butler's pantry" with a pass thru window, that would have made more sense. Is your "bar" a cabinet something built in? Have you considered either closing or narrowing the door between dining and living room and/or creating your pass thru bar there with your piano in the adjoining corner adjacent to the fireplace near the dining room wall? https://www.decorpad.com/search/butler-pantry-pass-through

For your space, yes you need a bigger rug with all the furniture on the rug. If the rusty red pillows are your accent color, maybe find a neutral rug with that also as an accent. You can keep this layout and add two chairs under the window with a table in between. Or you could move the love seat under the window and add a chair diagonally across as an accent chair. You need some artwork or photos or something above the sofa. Is this room just for reading/ conversation or is there a TV? Do you need any shelving for books or storage or display items? Good luck!

@Maddy Jens congrats on the house it looks beautiful! I grew up in a 1929 bungalow with no formal entry. Your new space looks like there may be room for an entry to the right as you walk in. A bench (with storage) below the window and a thin profile console table with mirror on the wall to the right of the opening to the dining room? The fireplace seems to be the focal point of the room. Keep a couch with or without chaise add-on on the wall and perhaps round coffee table with two chairs facing the couch? If you need desk space that could go where the rocker is now, against the wall perpendicular to the fireplace wall. Beautiful house! Enjoy making it your own :)