[houzz=]

I think I'd just dry wall, paint it an accent color and pull a couple of comfortable arm chairs up to it.

Cork wall tiles!! They even have the proper fire ratings to be used as a fireplace surround. And it will only cost you the cost of the cork ($4.99/sf) and the correct adhesive ($55/gallon = 180sf of "stick) and a bit of effort! Can be done all by yourself!

Depending on how you use the room any of the above ideas would work. I really like being able to watch TV from my kitchen family room area. I think to do a nice split faced stone (Home Depot has some nice ones to choose from) over the entire face. Then build in a TV that can be moved to adjust to be seen from different angles. Here is a great way of doing it. Have fun!

What is your design style?

Here's some stone ideas to help get you some direction.

http://www.houzz.com/projects/95593/Fireplaces-using-Buechel-Stone
http://www.flickr.com/photos/buechelstone/sets/72157626765433140/
http://pinterest.com/buechelstone/fireplaces-using-stone/

I would suggest a neutral, large format porcelain or stone tile in a 12x24" size set horizontal. It will accent the fireplace yet the 12x24" won't close in the space or add too much pattern. Simple & modern.

I think stone facing would be rather bulky and the space is not that big for an eating area and some seating. I would keep it as is, or keep the facing very simple and sleek. Drywall gives you the option of an accent color. I would even consider installing a bankette on the wall by the fireplace and having a table that could be small enought to fit over by the windows, but be expanded out to use the bankette (sp?) as extra seating. Could be very modern looking and quite practical as a place to store linens and kids stuff.

Personally I like to have everything symmetrical, so I would suggest you trade the sliders for one single French door on the left. Then, build out the fireplace surround on the left so that it is symmetrical with the right side. You might like book shelves on each side, but I would suggest you have the shelves start just above what looks like brick. On the brick space on each side you might install some fancy towel bars for drying dish towels since this fireplace is in the kitchen. I have seen such a kitchen fireplace with a framed red and white toile print centered above the fireplace. If you go with something red and white, you might want to paint the lower brick area red. If you prefer all white, that is great too!