Hi, I would create a space similar to this with a freestanding captain bed with drawers or a low storage unit with drawers with a narrow mattress or pillows. Combine with a bookcase to the high side, or shelving above, to make for a great toddler play/reading area.

Also could use this for a desk space combined with a similar seating area.

Ikea has several day beds that work well for this concept, and would also give you an additional guest bed space.

With a toddler, I would use some simple painted luan pieces to close up the backs of the open stairs to the level above his/her head if he/she were to get on top of whatever you put there, and use a baby gate at the bottom. How about a lamp, reading chair and bookcase? Would make a good story time nook to enjoy just before putting the toddler to bed each night, and a great place for mom to get a break while he/she is napping.

Assume you want to have the TV in that space? Can you mount it on the wall? If so, you could use the floor for a tucked away play area -- maybe a little teepee, table and chairs, easel, beanbag chair, etc. If you can't mount the TV, you could look for a long, low cabinet with drawers or cubbies that fit in the space. The cabinet would provide you with storage for toys, books, etc.

Yeah the Tv goes on the stand . Cant be mounted.. So left with half of the space. I was thinking of putting a bookcase or a indoor plants at the corner..