How about a built in to the right of the fireplace?

This look is nice too though! And for your space, I'd rather see the sofa on the wall where you could look out the window than the opposite wall.

And I definitely think sofa bed. Good luck with your space! I can't wait to see how it turns out!

In order to maximize wall space plus to not divide attention between the TV and fireplace, I think placing the TV in a built-in media center just to the right of the fireplace would work well here.
Maybe even incorporate doors to hide the TV as well as some drawers for more clothing storage, both of which your in-laws (and other overnight guests) may appreciate. :-)

Hi Ehanback, looks like we're "in-sync", lol! :-)

All good ideas, thanks everyone! Suebk64, I also though of putting a TV armoire to the right of the fireplace with a sleeper sofa on the opposing wall. The main limitation with this is that it's cut off from the rest of the room. The sleeper sofa has no visual connection with the chairs facing the fireplace. Avery, ehanback, I was thinking of putting the built in on the wall in photo 2 (to the left of the fireplace), and having the sofa facing the wall for watching TV.. An armoire could still go to the right of the fireplace as suebk64 suggested, but only for a guests to hang their clothes, not for a TV. Thanks again for the input. I'm still open to other ideas!

are the floors... squeakier than normal?