Laura,

There are many options available to you. It all depends on the budget and level of the work you want done. A licensed contractor is very recommended.

I would suggest using the sink wall and the breakfast room area all together as the main kitchen wall. I would relocate the cooktop on that wall with updraft ventilation with a decorative hood above - for a great look from the family room. Extending the function of this wall - the refrigerator can fit in the left side. I would also try to incorporate windows on either side of the hood/range.

One of the change that might make a big impact is to move the sink in the existing cooktop's place and open up that whole wall above, towards the family room. That section of the sink's cabinets can now become peninsula or even an island - can have seating on the back side towards the family room - using it as the breakfast eating area. This will be a great way to entertain with your guests even while cooking in the kitchen. Open concept - airy feel.

Definitely eliminate the soffits and extend cabinets to ceiling.

Like I mentioned earlier - it is a renovation project but the results will make a big difference to the overall look and flow to your kitchen - breakfast - family room area.

Hope this helps.