If you are not bar type people, I say tear it out and repurpose the room so you'll actually use it. If it were well built it may be a different story, but you could still have a little bar area with a nice piece of furniture that is located in your new repurposed room. And wow what a difference some paint makes.

It would be really helpful to see a floor plan that shows your kitchen, the bar room, the casual dining area and the formal dining room.

I absolutely would tear it out. It looks like a beautiful house, love the french doors. I don't think a bar fits the character of the house. I'd keep the pass-through, and put a buffet-type piece with a landing surface below it. Then you can move your table to the center of the room.

Thanks for the comments so far! The room was originally a sleeping porch I believe which is why it has concrete floors with a pattern in them. I'm attaching a rough layout someone made of the first floor. The green line shows the approx original outside wall of the house. The grotto was added on and hopefully will come off in the next few years to restore the original first floor layout.