Yes, a big rug on which all the furniture could comfortably sit would do a lot to warm it up. A conversational cluster in front of the fire will be welcoming and will allow you to furnish the walls with art and some attractive casegoods. How about some remote control window treatments for top and bottom windows? See Hunter-Douglas for some ideas. Then soften the lower ones with more colorful patterned panels hung quite a bit higher that the present ones. Looks like you have a mirror over the FP. Mirrors should reflect something beautiful or interesting, so a colorful piece of art would be better and would again warm things up. The art or rug can provide color cues for accessories, accent painted areas and such.

I agree with adding a rug. The style is up to you. Here are a few to choose from - depending on you taste: http://www.potterybarn.com/products/elham-rug/?pkey=crugs-by-material

http://www.potterybarn.com/products/karmen-medallion-rug/?pkey=crugs-by-material

http://www.potterybarn.com/products/heathered-chenille-jute-rug-natural/?pkey=crugs-by-material

If it were my house I would pull the furniture away from the walls. I would turn the loveseat and soafe so they were facing each other with the fireplace at one end and the chair at the other. The ottoman would be between them so you have a comfortable conversation area.

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I would also add a small chair to the corner where the chair is now and move the little table beside it.

Next I would create another conversation area. Maybe a couple of comfy chairs with a table between them or a game table with 4 chairs.

The paint color and the drapes and other accessories will be determined by the rug you choose.

Colour of the rug is probably one of the main things you'll want to think about when making your decision, as you'll want something that fits in well with its surroundings. Here's some help. http://www.curtainsandcurtains.com/rugs-guide.html

Thank you all for your suggestions! I appreciate your help.

Add more above the fireplace to fill in all the wall space.

What about painting the window wall an accent colour. This looks to be a large room. Furniture is too spread out. Perhaps dividing up the use of the room, with a study area - Need more photos