In a lot of tiny homes I have seen, mom's (or dad's) put a cabinet with a variety of things in it that can be taken out and then put away, so that what constitutes "fun" can be rotated. That's what I would do, add flexible storage and then store fun supplies in an organized way so that clean up is easy. What you put in the storage depends on what your kids like. You might also create a "reading nook." I would if it were me. I might buy my kids one of those giant tinker toy kits so they could constantly re-configure a hideaway. One of my friends got a toy shopping cart that she stored her daughter's books in so that it could be wheeled around the house. If my kids were artistic, I'd put up a big cork board so art could be displayed.

P.S. An ironing board with a sheet over it makes a fine puppet stage. And it can be easily repurposed when the show is over.

Again, depending on what your kids are in to, I might devote an area near the light source for growing plants or having a small pet like a bird, rat, fish, hermit crab, tarantula, hamster or turtle etc. . . . but not unless I was willing to put in the work to keep it well cared for.