how old are the children?

First I would fix the curtains. They should touch the floor.

Personally, I don't think the grommet drapes work with traditional furniture.

Is this a landing when you go upstairs to the bedrooms?

That is a really huge space at the top of the stairs. Could you perhaps take

more pics to give us a better perspective of the space.

yes, i think you could fit a play area for one child and an office. with one playing up there fairly often i would make doubly sure no accidents can happen.

it was a style for a while, and if i recall correctly it was like a family room area, for some it was a second, but i think for some it was the only one. most involved sitting and tv, often library too, along with toy area for younger. always giving way to a tv room as they age. some were turned into teen hangouts and sleep over spots.

Your child is still young, but you will see that very soon they will have "computer homework' and will want to spent time "on the net," which should be supervised by an adult.

I highly suggest as do most authorities that you create a space somewhere in your home where your child(ren) can do homework, play internet games, contact their friends in an area that you can supervise, that has a chair you can sit in, that is in your flight path, that is, you walk by the area often. The picture above looks good as a study area.

You don't need to buy the computer yet unless you want to buy educational material now to put on the computer.

If you want to use the room this way now, just make sure it is set up to be able to work with multiple computers, wifi, can carry the electrical load of computers, printers, and all the other gear that goes along with it. Think of it as an office. For your kids. Because their bedrooms aren't big enough for that.

hmmm this idea would be more for the adults, but a cozy reading area. Etageres, or shelves full of books and a chaise, or some comfy chairs. When your kids are older you could maybe add a small desk for them to do their homework at.

Ivy Bookcase,Bookcase and Ladder · More Info

Pine Bookcase with X-Brace Siding · More Info

For children's book nook, think colorful beanbag chairs and colorful bookshelves. Change the curtains to something more colorful, too. Some art featuring illustrations from children's books would go nicely, as would a nicely coordinated rug. Stuffed animals could be placed strategically as "reading buddies".

Play room and top of the stairs caused my mother alarm to go off, and so I went out on the web to see if I was over-reacting but it turns out falls are one of the most common in home injuries of kids. If this becomes an inviting play place for kids, precautions must be built in. With a 3-year old, they are starting on their path to independent play and they will find their way to fun spots, and so a gate must be included if not already in place, at the top of those stairs. If it was a more staid reading spot, for all the family, it might not be such a draw but could offer snuggle reading time too. Comfy large-enough seating and adequate lighting, with books in reachable shelves. That would all fit nicely there.

maybe something like this

or maybe this

Here is an inspiration photo.

A papasan chair might be a comfy alternative to a beanbag.

Here's a whimsical decor idea.

Here's a creative and attractive idea.

Elaine's last pic reminded me of a beautiful (and pricey but hand done) shelf on Etsy - but in the UK - called Elm Tree Bookshelf there - just for inspiration:

I also like this one.