So this is what I would suggest....where the cubbies are lower, you could add a bench pad there for more seating. Home Decorators has a line of cubbies that offer it.

Exactly what I was going to say. Put a toy box/bench under the window. You will need lots of toy storage.

If kids may take naps in there, exchange the two chairs for a small sofa.

You've been given a very nice layout suggestion. As a mom to five wonderful kids (all teens and young adults now) who were born within 4.5 years I can tell you some practical tips that helped my family actually KEEP a room looking decent and easily picked up by the kids within 10 minutes flat.
First and foremost, the most helpful strategy *I* ever encountered was the idea of keeping all toys on a closed rotation system. I had about 4 large bins (like big Rubbermaid storage box sizes) of toys and within each bin I had a good mix of toys that would appeal to all of my kids. But within each bin I would only allow ONE really "messy" toy. By messy toys I mean toys with a lot of parts and pieces that tend to get left out because they're not done "building it."
I would rotate which bin was allowed to be played with every week or two. It gave my kiddos enough time to thoroughly play with items, but each toy rotation time meant they now got to play with other things they hadn't seen in a number of weeks! It was always like Christmas morning again each time we rotated bins. I kept bins that they weren't allowed to have out that week locked away in a closet. (It wasn't really locked, just the rule that they weren't allowed to go in there.)
After a couple of weeks they got used to the system and really, REALLY appreciated the fact that even if they scattered every toy available that week all over the room, they could still do a satisfactory cleanup in less than 10 minutes, even without mommy's help. It totally took away that "toy overload" feeling for them.
Now I will admit that they had other toy/activities available to them that were not part of that toy rotation system... I kept things like art supplies, educational systems, and puzzles separated and those were played with during highly supervised times so that a proper cleanup time could be done before moving onto the next activity. The toy rotation system was for undirected play time.
The next thing that was helpful was to have them start playing with those "messy toys" in a designated location.... like on a train table or a play rug. It was a lot easier for them to keep the parts together if they had those easy physical boundaries. (And it helped all of us better avoid stepping on those painful Lego's!) Plus it was a designated space where they could leave their creations out for a few days to keep working on it and modifying it.
The last idea that worked well for my family was shelving with open baskets for daily toy cleanup. I didn't bother SO much with trying to make sure every toy was put away "just so" each day, my goal was to make sure the toys got picked up off of the floor no matter which basket they got set in. After all, we didn't have THAT many toys available at once anyways, so finding the other part wasn't so difficult, you just looked in the other baskets really quickly. However, as my kids got a little older they started naturally organizing them better during clean up time... I think it was because they were never overwhelmed by how much there was to clean up. We took the time to organize the toys again before another toy rotation. (I would also check for any broken or missing toys and take out any trash that had inadvertently made it into the open baskets... my most artistic daughter was notorious for finding scraps of paper to cut up and her homemade confetti always made it into those baskets, LOL!)

These ideas were THE most helpful to our family during my kids' toddler and elementary school years. As they got older they played with a variety of toys less and started getting more into specific hobbies and keeping those in their rooms, the playroom became more of a family gathering spot for gaming or movies. These were the ideas that made it so I could have a decent walkway through the room even with a variety of furniture arrangements. Hope they help you too!

Thank you for all the info! I have heard other parents talk about the toy rotation system before but I never really understood how to go about it- and your really helped me visualize it. Thank you!

Nancy, thank you for the diagram. I have no clue why I didn't consider under-window storage. Obviously it makes a lot of sense. THANK YOU!