Also, need something under the window like a bench or big poufs (not sure what they're called, but large tufted stools) my kids love to look our the window and since we rearranged the furniture miss having somewhere to sit to look outside!

you can definately use a rug to define the living room area...go with some sort of print on it. i like the idea of blue, but your chair and ottoman seem to be green, how about going with few shades of green and a bit of rust and chocolate brown?
A nice idea for the window wall can be a console table with two cubes tucked underneath...

I think having the chairs recovered and adding a coordinating table cloth or placemats will help. I found a pretty blue fabric I'd use on the chairs. Picture attached. I like patterns on chairs because the little messes that are a part of life are less conspicuous. Then add pillows and/or throws to your sofa and chairs in the same color family in a variety of prints and textures.

I would add a large area rug to the living space and leave the dining area alone. For the rug I'd use something simple with touches of blue. Homedecorators.com has a huge selection to look at. I've used that site to help me decide what direction I want to go. Then find a store to look at and touch to find the one that works for you.

Your decorating taste seems to be minimalist so I'm not sure you'll need anything on the dining room wall. With the introduction of coordinating color, you may find the empty space soothing.

I hope this sparks your imagination to start looking for your colors and where to add them.

I am usually a very neutral person, but when I saw these pictures, I wanted to fill the room with more color. I would do a big area rug in front of the cream couch and arm chair. I would pick a rug with a neutral base but colorful floral design (more modern or whimsical). I would add colorful throw pillows on your cream couch. Remove the table cloth. Put a simple table runner on the table. Choose pretty colored roman shades for the french doors. Find a large picture for the wall by the table. Recover the fabric of your dinning room chairs (something more modern, fun colorful floral print). There are tutorials on chair cover re-dos. I might replace the chandelier. Take out some of the collectables in your cabinet. It is a little too busy. Fill cabinet with less pieces, but with more color. A few bright vases, plant, colorful frames with family pictures, wooden bowl with mossy balls. I too like the idea of putting something under the long rectangle window. You could build a type of window seat.

I think there u can find many interesting stuff for your living/dining area!)
http://www.thehomeaccents.com/

Add color. In addition to blinds add some drapes with some bright color.

I agree with adding more colors to the room. Either a darker brown for a monochromatic look or fresh green as in the example below.

thanks all for your suggestions - I went to the Home Decorators by me and I was thinking that this rug might be good - http://www.homedecorators.com/P/Mandarin_Area_Rug/380/ and get interesting pillows in that darker blue family of the bamboo (which is more like an Indigo in real life). I also liked this one - http://www.homedecorators.com/P/Rosa_Area_Rug/310/ the solid part is grayish blue and I can have fun with teh pillows
As for the wall - any ideas on what to put on there or where to look for something? was thinking if I went with the first asian-y rug then maybe something like a carved wooden "lotus" type panel - something along this lines (either as one piece or as a 3 paneled piece) http://www.homedecorators.com/P/Amelia_Wall_Plaque_-_Set_of_3/820/

Loose the table cloth and DO NOT REPLACE. If you need something on the table use a runner. Then do a nice table scape with flowers and candles. When eating use place mats. Add some kind of window treatment with some colorful fabric with blues in the pattern. Keep this light and airy nothing over done, The side table that EB suggested is a great idea. This is a good start when done post before and after pics. Then lets attack the living room.

I'm a fan of Asian accents. From the carpet you can find the fabric for your chairs and table.

I also like the a big shelfscape like the one I'm attaching. You can put one or two items on the shelf and leave the rest empty because the shelfscape is art in itself.

Pictures of your choices and my selection attached.

I'm wondering if your hutch can be moved to the right so that it's in the middle of the wall. It looks like the dining table has its leaves in. Maybe remove them to allow space for the hutch? This will allow the two arm chairs to be able to be pushed back and have a table between them. It also divides that very long wall giving you smaller wall surfaces to work with for art arrangements.

For art take a look at Etsy. Linda Donahue, who is here on Houzz has some lovely land and seascapes. A couple examples are below. A treatment to consider for the dining room wall is a picture ledge or floating shelf displaying a few well chosen pieces. They can be rearranged periodically as your preferences change. I like the wall sculpture, but think it may be a bit wood heavy on that wall with the hutch there, too.



Here's another rug I found on Home Decorator's with a little blue in it, paired with some poufs so your kids can look at the windows!

Are you going to be getting a coffee table?

I think Manon Floreat's suggestion to move the Curio cabinet towards the dining area just might work. It would act as the dividing line between living and dining and create a sense of more floor space. Nice thing about the poofs is they can be used as seating or coffee tables with a tray on top. In small spaces I'm all for multi-use.

We had thought about moving the cabinets over, but there is a heat/central air vent that is in the way. @Manon Floreat - where are those poufs from? I wasn' planning on a coffee table since it is a small space and I'd rather my kids (twin 4 year olds) have the room to move around.

Cute house..I had one very similar! Area rug for sure & great idea to add blues in ...so pretty. I like the second rug better. I agree with taking leaves out and trying to make more room for cabinet. I don't think a little wall art would hurt. It is going to be very pretty and soothing with those shades you like! I have some vents in the way also. If it's not a cold air return and u have enough others in the room u can close it/and/or get a cover to direct the air differently (curved) so u can put something on top of it:)

The poufs are from Lamps Plus. You can find similar and better prices on Etsy.

http://www.lampsplus.com/products/surya-slate-blue-wool-18-inch-cube-ottoman-pouf__y3002.html

The second rug you chose was more modern, which I think will go better with your room, because your room is very modern. What helps me choose colors is using the main color and finding complementary colors that go with it. A lot of online shopping allows you to pick colors from a chart. I hope I made sense....great room btw

I just had to put these 3 pics together.

nice! My only fear is that the reviews of that blue/teal is that they are both much lighter than they appear on the screen. I saw the ivory/navy one at the store and the ivory is really a bluish grey and the navy is more indigo. They didn't have the blue/teal in the store. love that pouf! (also love how they go with the rug Manon suggested above, but that rug is more understated) What would you recommend for the wall?

The rug and the poufs are listed as slate blue, not teal. If you want a stronger contrast, Navy blue or indigo would be beautiful. Slate Blue is a "muddied" or softer blue. I personally prefer the softer slate blue.

On my screen, the rug and puffs work together. The fun, and scary, thing about shopping online are the happy accidents. Things that don't look like they did on your computer screen but work together anyway. And most vendors have a return policy.

I don't have any other suggestions for the wall. I hope someone else can suggest a few creative ideas.

Check out art.com. Thousands of different styles of art you can have framed. I've had great fun choosing a piece of art and seeing how it would look with various sizes and styles of mats and frames. (Shopping without the expense of buying).

It could also help you decide what style art you like. there are various categories to choose from.