The dimensions of the room are 15'4" by 10'5".

Are any of the walls around the staircase load bearing? Or are those the knee walls that are 59" tall? Also, is the ceiling 8' tall or can you open up the ceiling to create a vaulted ceiling?

I'm pretty sure the walls are not load bearing. The knee wall in the smaller room is 59" tall. The ceiling height is 8' with very little space between ceiling and roof.

Would you consider a dormer of some sort in the bathroom?

We had considered a dormer but thought it may be too costly. What are you thoughts and costs of dormer? Thanks

Just 2 more questions:
1. is that a sink in the corner of the smaller bedroom? If not, which side of the room would be more convenient to route plumbing in from the floor below?
2. Are you planning on this being one giant room? If so, will there be a door at the bottom of the stairs or are you not planning on having one?
Regarding the dormer: After looking into different options to open up the ceiling on our home I can tell you that it was too costly (at least for us) for any of them to be worth it. I would personally recommend just leaving the ceiling as is & painting it a white satin sheen to reflect light & make it seem larger.
As far as the rest if the room goes, I drew a general plan (on the iPad, sorry if it's a bit messy) that I think would work well if you're going for a more modern design. I'm not sure if the existing closet width is at least 30" wide, but if it is you can put a toilet room in that space. The sink vanities facing each other could have a floating mirror like in the photo below to keep the open feel but maximize space. Let me know what you think!

Here's an example of the floating mirror & the shower style/orientation I was thinking of.

& here's a few examples of closets in bathrooms

Hi Jackie,
Real hard to even ballpark a dormer cost sight unseen, I'm not even sure what part of the country (or what country for that matter) you're in. Have you considered consulting with a professional design-build outfit to see if they might be a good fit?

First of all,thanks socalswar. The feedback has really inspired us. We really like the toilet in the cupboard and the floating mirror. We are going to look at creating half walls in both rooms then hanging a floating mirror over the half wall in the bathroom ( open but not). We are going to walk it out tomorrow and put together more drawings to send to the contractor.

We have spoke to a professional - we hired an architect and so far haven't been able to get vision and budget to come together.

great! glad to hear you're starting to put together a plan. I would love to see what you end up with so don't forget to update us with photos!