I'd go neutral on couch....sand or tan color. Add the blue( or any color) as your accents in pillows, rugs, accessories....perhaps a slate blue chair. Looks like a cozy great room!

Also curtains need to be changed out...and put a more substantial mantle on fireplace....add decor on it to tie in your accent color. Look at Houzz photo for inspiration.

How about a neutral sectional in the space. Nice thick mantle above vent and some roman shades on the windows. Maybe de-clutter a little bit. Cozy, comfortable room!

I like the rendering above with the furniture. The fireplace would actually look REALLY great if it were painted black brick. The black paint would actually make the pine paneling look more of an updated design.

Don't run out and start buying furniture. There's a whole lot of work to be done first.

Remove curtains.

Paint paneling and/or fireplace.

Remove carpet--wonder if there are hardwoods under that blue carpet?

Add a mantel.

Get rid of all the furniture you aren't going to keep.

Clean out the room so you can get a new perspective on what purchases you need to make.

I like the furniture arrangement. I'd declutter, replace the curtains with floor to ceiling burlap drapes, keep the blue plaid sofa and slipcover the chair. Find a way to display the instruments when they're not in use instead of setting them on the floor.

ohhh slip cover, great plan! i dont think you have to paint the fireplace...just add a mantel. im not sure you need to paint the walls either.. this has a cozy cabin feel.

Decluttered, neutral chair, more interesting side table, burlap curtains, bold art:

I recommend removing the blue carpet. If you can't have wood or tile floor, use off white carpet. Also off white or neutral sofas. Then bing in the color with pillows, throw and art.

HI -- First and foremost, before you go out to get furniture you have to set the stage . The walls need to be done by either removing the paneling and or painting it . There are too many textures going on with the walls and the fireplace brick. Makes for a very cluttered look. I know you said the walls have to stay for now but I think they should be done first . Then you will have a clean canvas to start with .

I would go with off neutral duck slipcovers. (Sure-fit slipcovers is a site on line) rather than spend lots of money on a couch I am not sure of. The flooring should be your focus. Wood if it's underneath or flat weave/Berber carpet. Hen bring in your colors

I like yr space . There is a nice flowing ambience.
This ref pic may inspire you.
A nice large mantle as seen in the ref pic would look nice in r space,
One suggestion would be to paint the walls.(but not necessary)
A mix of leather and upholstered furniture
A nice landscape in oils over the fireplace
the musical instruments do make yr space inviting and lived in.

suggestion for art style

Wow, thank you all for the great feedback! I knew I had to change curtain rod and color but never thought of lengthening to floor. The carpet is actually a creamy Berber but it is old. Need to check under ...I think it's just plywood. The room is actually one large rectangle with dining room on east side so I have struggled with matching colors to the dining room. We have a 2 year old and love music ( hence all the clutter and instruments) I like the instruments on the wall--fits our style and conveniently located. Sounds like neutral couch color is the winner.... Now for the accent colors.
I really appreciate all your tips--I am a rookie!

Also, we would love to put a mantel on fireplace... Over vent? We are in rural San Diego so we would definitely survive without heatalator (sp?). We worry about hanging too much on fireplace though because of heat....or do you remove when there is a fire? I really am clueless! Thank you!

OK, so what exactly is the question ? ;-)
You mention that you would like to coordinate with DR but you neglect to mention these colours.

As a musician, please store your instruments in their cases. Especially if you have small children. Other than obvious protection against damage, your cases help to keep wooden instruments from extremes of temperature and humidity--which can play havoc with intonation.

I guess I need so much advice I was vague. I need a new couch for starters. I plan on changing all curtains since dining and living room curtains are same color (burgundy--kind of too much Christmas going on throughout house) If it was a clean slate with cream carpet and pine walls what is the best option for couch colors? Many suggested tan/neutral and I am considering that.
Yes, our instruments are played often and appreciated almost daily (w/ a tuner always needed) We keep the fiddle and some others up, but love to have them handy (the cello in the corner--looks like a bass-- my husband made and we don't mind our little man strumming it occasionally-it's worth it to have our son exposed) I think we will mount them since they are also pretty and we need something on the wall.
I will keep you posted of changes. Thanks for your help

i agree with lefty47; do the walls now, or you never will.

I liked the photo with the whitewashed brick and painted paneling. Knots will bleed through, but that's ok. Wood floor ideal. Square furniture to FP. Leather oils be nice accent for chairs, maybe too much for sofa.

With those "beefy" walls, I think I light blue sofa would feel a little "weak." Perhaps your son would feel included if you used blue - but navy blue? 'Looks like it would work with some of the other furniture in there too. :)