I'd make this a sitting area...I'd do a cole and sons wallpaper -the one with the books...or some other amazing paper that has tons of visual interest. Then I'd put in a contrasting very upright settee to double as a banquet, then on the other side a fold down table for an instant banquet eating area....great chandelier, large hyde on the floor.

A sitting area sounds like fun! What room is on the other end? Is it your living room?

Would a drop leaf table to the right side work, with two really comfy chairs ? If you are more modern....paint the table black or silver...keep the walkway open from the two rooms...Over on the left wall side where you have a bit of wall space...lots of options...TV, desk, serving bar, bookcase, cubbies, all depends on what you need...

If the other room is your living room I think a sitting area with a sofa may make the place look like you have two living rooms, but a room with a banquette and a table might make it more of an informal hang out place. If your kitchen has a dining area the banquette I posted may be too much too. Can you post some pictures of your kitchen?

Sounds like a few more pics are needed. (1st room and kitchen) Here they are! Keep the good ideas flowing. The kitchen has a large wall so was considering a banquette in kitchen.

Sitting area/book nook? Maybe a small table set for playing card games/board games?

If you think you may want some art for the space, feel free to check mine out. =)
http://angelina-vick.artistwebsites.com/

A library/study/reading nook?
A TV room? Move the TV from the front sitting room to make that room more about relaxing in front of the fire, listening to music, reading.... And then the middle room is just about curling up on the sofa, watching TV.

Kitchen banquette and table is the best bet for that large wall. Your large piece of art that is propped in the living room might look good there. How about a small home office/ reading nook in the middle room? You appear to have a spot for a slender office center on the wall opposite the sofa. I'd move the sofa in front of the living room windows and the chair by the FP with TV to the left of the doorway to the middle room. Then add two swivel chairs and a table to the middle room where the sofa was for a reading nook. Uniform stationary drapery panels throughout the space will help tie things together. If you can find non-matching but similarly styled area rugs for the living and middle rooms it will tie it up even better. Here are some IKAT rugs for inspiration.