I like the idea of using the front room to it's fullest. The plan is pretty good but I propose a long sofa as the "entry" then four chairs (two flanking the sofa). You can seat 7 easy that way, comfortably. Family of three...with a few guests.

Good plan is the one that will fit it all without looking squished? Measure before buying ya.....do you plan to eat in kitchen? or table needed in this room still?

Some ideas

You may be able to put this by your door as a bit of a divider, entryway, add baskets, handy for the children's things, not sure if it take up too much room

@Darzy thank you for the suggestion. I though of that solution but I am afraid that TV will be too close to the sofa so watching movies will be a pain in the neck :) Don't you think?

@nimrod25 same here. Don't you think watching TV from that distance will be uncomfortable?

blenheimnewzealand I really like the idea of using couches to create entryway. How can I place them so if I hang the TV on the wall in front of the entrance the TV wont be too far? I don't want to create big gap between the couch and the TV. Hmmm

Best Buy says that maximum distance from the TV is 2 times the size of the screen size. I truly think Best Buy is trying to sell the largest most expensive TVs they can. If I applied that to my 32" TV I should be 5 feet from the TV, yet I watch from 9.5 feet. While I plan to get a larger TV in the future, I don't feel that I'm missing anything because my sofa isn't closer to the TV.

Your living room is 16' wide wall to wall. With a sofa on the wall facing the "stair" wall, TV viewing would actually be about 13.5 feet from the TV screen. Given you have a 52" TV, you would be viewing at 3.1 x the size of your TV. You won't feel like you are in a movie theater, but I don't think you will feel like you are in the next room either.

I having rethought this, here is a possible furniture arrangement with the TV on the "stair" wall.

I'm liking this arrangement much better than my first. There is comfortable seating for 6, easy traffic flow through the room and no odd empty areas. Even though your room is carpeted, I would use an area rug to define the sitting area and to keep from getting dark areas in front of the sofa and large chair on your sea of light carpet.