Get rid of the clutter/small things and then pain t what is white the same color as the wall.

Have a photo picture frame such as this tree example on the wall to save shelf space.

Have a decorative storage chest on the floor beside or where the purple couch is. Maybe even a coffee table with storage for the toys. Photos could be moved to the wall across from the window

Adding more to the mantle area would

If not for the two young boys and toys a horizontal waterfall may look good but it is not recommended in this case.

Thanks for the comments! Yes, cleaning the clutter is a must and I just snapped a shot to give you and idea of what it currently looks lik. Yes, that type of shelving is what we are considering. I was just thinking some tiling and/or molding around the fireplace might look better. Tree idea on the wall is a cool idea.