Pull the sectional and rug out in front of the window and turn it so one wing faces the TV wall and the other one faces the window, creating a division in the center of the space - adults on one side and kids on the other. Add a tray to the square hassock and place it 18" from the sofa to be useful. Add a long storage bench under the window. Frost or add a patterned window film to the cabinet doors and take the cabinet to the back wall to replace the table. Store toys in the cabinet and when it is full the other toys must go to kid's rooms or be given away - so they'll have to be picky about which ones they keep. Paint the tall green cabinet to match the teal cabinet and put it right of the door so all of the back wall is toy storage. Eliminate the low cabinet with drawers. Paint the table black and set it under the drum fixture or under one of the recessed lights in the play area for a place to play table games and work puzzles or do homework. You might also consider getting an arc floor lamp to hover above the table if the other locations don't work. An indoor/outdoor rug under it would catch any spills and hose off easily, protecting your carpet. Get a credenza (not a TV stand) 25% wider than the TV and put TV on or hang it above the credenza on the current TV wall. Try this arrangement now and add photos of the changes, so we can help you tweak the space before you start painting.

excellent advice :)

Thank you for your help! My sister and I already made quite a few of your changes. I am doing more today then will post updated pics :)
It's already so much better! xo

Run to IKEA for storage ideas. Do a whole wall of cabinets. Pic #1 below is the billy series, I think you can doors for it and you can put in corners. Pic #2 is "Liatorp". The besta is also great and has a lot of door styles (glass on top, panel on bottom) They even have lights you can put in.Ugh I promise I don't work for ikea lol.

If you chose the billy I would go with the medium brown because it will tie in with the wood tone of the cabinet your TV sits on (which is gorgeous)