I don't think you'd be able to cover the current facade as the clearance of the insert(?) may be an issue. But you ought have the state of the unit checked in any case - before you proceed with a refurbishment.
After that I think the direction for materials used to face a fire in a log cabin need to be simple - stone or brick- and a scale closer to the thickness of the logs. The hearth could be slate and the mantel could be a more rustic piece- an old beam or rough hewn log

Wondering if you whitewashed the panelling above, both side posts and window trim so it felt more unified and blending will help detract from the fireplace's features. Paint the mantle white, as I think there is paint for stone. Add smaller and more items on the mantle and a large wicker basket on the floor, again to take focus on what you don't like. [houzz=]

Thanks for the comments! The fireplace requires a non combustible material 22" above. I have enough space to change the mantel to wood. After I took down my holiday decorations I left the mantel empty except for the clock. Needed a blank canvas. We would love to paint the walls but not quite ready for the commitment. It is a 20' x 20" - 2 story room and would cost about 15K to paint properly. We have already changed walls in a couple bedrooms so we know the approximate price. Most people that come into our home feel that painting/white washing walls would be a mistake. We feel that it would be stunning and feel more like the lake that it is, not hunting lodge. We can always paint but can't get wood back...