Some inspiration. I don't think you have enough overhang at your peninsula to justify barstools. Your lamp looks large and dated. What is the table it is on? You can paint the MDF after sanding. Check for DIY instructions online. Do you have upper cabinets or just drawer storage below?

Window treatment - curtains can simply stack back either side of the window and shades can be raised for the pup.

TV on low credenza with some decor

The wall color and sectional look great, esp. with the red you have in the room. I think the first thing would be to get a larger credenza for under the tv. It looks way too small in proportion to the tv. See deco's example above. If you love the red, it might be fun to think about using a red piece...maybe something from craigslist painted red?

Some ideas

Thank you folks! Some great ideas here. One idea is for us to audition the credenza that is currently behind the couch over under the TV. But I definitely agree with everyone's thoughts on having something more substantial under the TV. If we move the couch back after moving that credenza then perhaps there is then space for arm chair(s) in front of the TV facing back towards the couch to make it more of an entertaining area (circle).

Does anyone have a thought on the lighting situation or lamps that would suit the space?

Thank you again.

@decoenthusiaste: yes the kitchen has upper cabinets. I will take more pics and do a new post for the kitchen. I agree about the overhang. We overlooked that when doing the kitchen work. In this case though function usurps form as the peninsula is a very handy space for quick meals and hanging out (kids). We may re-do the counter top and add an 18" overhang but that might tighten up space in the living room too much. It is another 'design dilemma' we are facing.

@celerygirl: thank you for that mock up -- great ideas on the window and art.

We do like the red but we also want the space to be calm and inviting.

@housegal200: thanks for that great idea on the patterned rug