I would find or build a more shallow couple of shelving units for those two spaces. Maybe something 8-12" deep? You could even paint the divider between them to match and make it look like one piece.

Well, keep in mind that you can always close up anything you can't use. But here are some first thoughts.

1) Move the TV to the opening where you currently have lamp -- better height, etc. Maybe you can hide the boxes behind or around it there.

2) Hang some art in the niche over the fireplace. This would be my first candidate for drywalling over, too.

3) Everything between the fireplace box and the uppper niche -- mantel, tile, medallion... If you want a mantel, put it lower.

4) I think that the cupboard to the right (if that's what that is) is for firewood.

5) I have no idea what I'd put in the upper-left niche, but I think I'd keep it simple -- one or two striking pieces (colored dish, driftwood, sculpture) rather than a busy wash. Either that or put another shelf up there and use it for books.

Hope this helps!

On the left side I would build frame and add doors that match the bottom doors to enclose that side. As for the strange tile, I would tear it out and do a wood mantle and paint it white. The large opening where the tv is should be closed up and the trim removed, then you can mount your tv flat on wall and it will be much lower. Hope that helps a bit! Good luck!