I'd leave the layout as is, but invest in a storage system for your children's toys. Build in a window seat with storage drawers and simply put the toys out of sight when guests arrive. You can also put an upholstered cushion on top to create extra seating when you have a house full of people. For the stuff that's too big to put into the drawers when you have company, temporarily relocate them to your children's rooms or the garage. See examples:

When my kids were little, we did several switches of spaces to accommodate those stages. Give it a try!

IMO storage for toys that looks nice and when you are entertaining the toys go away. I do however don’t have a problem with switching spaces around if it works better for how you live right now. I always tell my clients to not let the kids take over the space but we have a new great Pyrenees’ puppy who has dog toys everywhere. We are trying to teach him to put them back in his toy box but not working yet

I would think that you would end up never eating at the dining table, because it's too far to shlep all the plates and you end up eating all your meals in the kitchen. Could be an ok outcome, but just one to consider.

Also, while the dining room is more separate from the living room, it looks like it might be closer to the front entrance, so you might end up with all the chaos being the first thing that guests see...

Agree that the switch is temporary and minor, so go for it. If you don't like it, you can change it back. I imagine you'll make several changes as the kids grow.

Go for it! We're swapping our dining room and living room in a couple of weeks. I'm SO excited! Stay versatile! As your family's needs change so can your home! :) Our dining room will be further away from the kitchen, but I "walked it out" and it only adds five or six more steps. Good luck!