In the second view you have two issues. First you are now seated too far from the TV for comfortable viewing AND the area rug has become too small for the space. You always want your front legs of your chairs/sofa on the rim of the area rug.

I would select #1, but the rug is way too small for either arrangement and the two rectangular end tables should be round and one should be placed on either side, ....not both on one side of the fireplace.

Instead of 1 or 2, I would put the T.V. on a console on the long wall, one sofa perpendicular to the fireplace on the right side, the other sofa parallel to and facing the fireplace (so the sofas form a L), and the chair to the right side of the T.V.

Changing the TV at this point is not an option as we spent a decent amount with a contractor to wire and we also thought it was a no brainier as we gain a wall vs losing a wall for TV hence current situation. We are going to get a bigger rug and play with layouts to see if we can connect the living room a bit more and maintain the open layout. If not, we might consider the parallel sofa and sacrifice front of tv sofa layout. We brought the sofa off the wall and wife felt the room got substantial smaller and walk behind the couch was too narrow. Thank you all for all the great advice. Wished I started here with this project. :( and please share any other thoughts but I see we have limited options.

I like the second but with the sofas brought in more. Also we have a similar layout with chair facing away from TV to seating area, good for conversation but obviously not for TV watching, so we got a swivel chair that can serve both purposes. Works for us.

definitely option 2 for every day living....except you need a much larger scaled area rug....the front feet of each seat needs to be on the rug, and to create a cozy living space, pull the sofas a bit closer together to create an L shape. then add table and floor lamps, some curtain panels on the windows, toss pillows and wall art.