I think it would be nice either tiled or covered with marble effect laminate! Also think the tv would look good above the fireplace maybe on a bracket that pivots so you can move it about a bit!

There are tutorials online for using a sponge to add realistic brick color to painted brick. You could also paint the brick a dark color and add painted picture frame panels which follow the angle of the fireplace up to the celing (behind the fireplace). Same concept as a corner shelving unit. Then if you mount the TV above the mantel it will all blend into one unit. Just for grins, you could hinge one panel closest to the corner and use it for hidden storage. And I'd put the sofa in the center of the room facing the fireplace rather than against the wall.

Perfect, JudyG.

Without know what "style" you prefer whether it is traditional, contemporary, etc., I can envision replacing the brick or covering the brick with a horizontal pencil tile (perhaps in limestone). This is a somewhat creamy color and will go with a variety of design styles.
The color scheme is a little blanco and would look wonderful with touches of gray, maybe in the stone and paint. You can add pops of color to your taste.
I would think about possibly adding cabinetry on either side with the tv on the right side of the fireplace. The sofa or loveseat could be placed at a diagonal with sofa table behind as you enter the room with a pair of chairs to the right and accent chair on the left. An area rug could go on the carpet for now to add color.
Dark wood floors in the dining room with a drum shade light over the table.

Stone all the way up to the ceiling. It also needs a new front/doors to make it more modern. I would also put in wood flooring throughout the kitchen and family room or a dark chocolate color carpet in the family room if you didn't want the wood throughout. I would then finish it up with a very contemporary color paint and complementary curtains. It would totally update this beautiful space.

I would paint the brick dark charcoal gray with faux rock texturing. Paint the walls a pale gray with white trim. Hang some black&white art prints with thick white mats and thin black frames. Accent with yellow blossoms like forsythia and clear vases and mirrors.

Paint it!!!!!!!

I think this really depends on your style, like The Woodshop of Avon Inc stated. If this was my space, I would install drywall at an angle giving you a nice 1.5'-ish mantel space and do a mantel-to-ceiling custom cut mirror with antique finish. I would leave the fireplace crisp white and paint the walls in a warm grey; then add soft butter yellow accents.

Here's what I did with my corner fireplace. People seem to like it. plenty of before/after pictures are here:

https://plus.google.com/u/0/photos/114683903596276157372/albums/5675006481063971249

take off the brass enclosure, take off the "mantle" surround, trim the face in Absolute Black granite, top the hearth in Absolute Black granite, paint the under bricks (face) of hearth in black stove paint (can take the heat), face the rest of the brick from edge of granite to the walls in tongue and grove boards (wide or narrow) and top that with beefy hand hewn "board" for the cottage look. If your carpenter is good you can hide the wires to the TV & center channel speaker in the wood work. Want to go rock star? add a gas burner and glass rocks on top. We did it!

I love a fireplace! Keep it personal, warm and cozy. A neutral colour and some bold art would create a statement. Leave the TV in the den. Light a fire and have a great conversation with friends and family.

Paint the wall it is on a dusky color of red, orange or purple. Take the doors off (especially the ugly gold strip at the top...might have to paint it black) & put a black screen in front. On the hearth add some black candle pillars of different heights with candles that contrast with the color of the wall (ex. Dark red wall, purple candles). Sit some greenery around & put a large mirror or painting above the mantle. I think it would be inviting & the cost would be less than tearing it out & starting over.

Is it painted brick or brick in general that you dislike? You could always strip the paint to reveal the original brick, put built-ins to the right of the fireplace, and place your TV there. Rather than going through the trouble of installing a gas line, look into a self contained and vent free ethanol burning fireplace. Have all the beauty of a traditional fire without all the mess.

Have you considered removing it altogether and freeing up the space to be used more productively and creatively?

I just got finished fauxing a brick fireplace. Use what base you have and get some faux glaze and add a nice amber to it. Chip brush this on heavy and let settle in all of the pits but remove from all mortar lines. It is a cool look. Sample on a lower area to get the hang of it and base back out to try again. The trick is really in the removal. You can do it!

I would recommend removing the brass on the fireplace, add some nice fireplace doors (or open it up), maybe a log set or new insert (if you want to go to gas). Take off the white paint and if the brick isn't satisfactory, switch to a thin ledgestone veneer with either a stone or concrete hearth/mantel. Assuming you do switch to wood flooring, a complementary/contrasting material adds a nice dynamic. I would recommend going to the ceiling with the stone and use the mantel to create a division and accent with a different color stone (ie copper colored ledgestone veneer with shell colored mantel/hearth).

I would stucco the brick front of your fireplace, something coppery would be nice.The stucco will smooth out the brick and give it a more modern look..the hearth could be tiled in slate..Slate offers beautiful natural colour and is quite neutral, it will go with anything. paint the mantel, you can even paint the brass fire screen.
If your TV has to be placed in this room it would be nice if it was above your fireplace, frees up floor space, otherwise if you are placing it on the floor it should go to the right of your fireplace rather than to the left in front of the window..
If it's in the budget continue the wood flooring throughout..If not I would leave the tile and put wood in where the carpet is instead..

U.S. Environmental Protection Agency emphasizes the importance of burning the right wood, the right way, in the right wood-burning appliance to protect your home, health, and the air we breathe. You may want to search locations for information about "air toxics" or "particle pollution. " http://www.epa.gov/burnwise/

Here's a fixer up we did a couple of years ago
https://www.facebook.com/photo.php?fbid=1268265903804&set=a.1231719910177.36638.1144515988&type=3

Contact a faux finisher. My painting partner and I did a very similar painted brick fireplace. We used a "stucco" like product over the brick to mimic a crumbling tuscan wall. The brick we left exposed, we "repainted" to look like aged brick. It came out amazing! I should post some before and after pics!

For easy and cheap way I would paint the brick a nice red-orangesh/brick color and trim it with a modern-contemporay trim, paint the wall in relaxing grey color,
OR the more expencive way to replace the brick with a nice contemporary mosaic tile (with same color tones red/orange) with a dark modern trim and same grey color for the wall and cool art work on the top of the fireplace. :))))

Thank you for the wonderful suggestions. Definitely considering the sofa in middle of room w TV on right side with a built in--hadn't thought of that! There is a door to the outside in the middle of the left wall, if the sofa blocks it, we might look into changing that to another window since there is a usable door off the kitchen.
For those who posted photos--Thank you, big help!!! I can't believe how much you have all helped me transform the room, much appreciated.

Our friends had a cabinet company in to install cabinets near their fireplace and it looks great. That way u could place your couch on the 1/2 wall and 2 chairs with a table between on the side wall so they can look out the window and also allow for conversation as well as tv viewing. I like the pics that Judyg sent u. Also there has to be a comp that restores fireplaces to original if u want to go that way. The fireplace has beautiful wood around it!

I would paint the brick a dark brick color trim moldings in white or off white, which ever matches best, and do color on wall for contrast. Add either mirror and candle above the mantel or a very large wreath with lots of colored ribbon. Good luck.