Without dimensions it’s difficult to tell, but to me it appears that your furniture placement looks “off”. Regarding the rug, could you pull it away from the fireplace & place or und the front legs of th two chairs? More pics / floor plan would help.

If you have a TV in there, I don't think the furniture placement is conducive to watching TV. Is this the only TV watching area? If so, not ideal set-up for 2yo (as he/she gets older and wants to watch, etc). If it's not, then maybe get rid of TV and bring the 4 chairs around the fireplace with a coffee table and add smaller (wood, airy) chairs by window (or 1 reading chair in contrasting color with a reading lamp).

I think rug is too small.

Try a washable 8x10 from ruggable.com; good reviews and lots of looks and colors.

Thank you for all the responses and ideas.

So here's the best I could do on layout :( Hope this helps.

I do like the idea of just moving the TV out. I could easily move the rug underneath chairs 1 and 2. Would that be sufficient?

I'm also considering moving the chairs to each side of the firewall (two on each side). And adding more seating by window. I think the rug might just work if I moved the chairs. Any recommendations on what would work with the existing furniture to add to window? Also, would I need another rug to place under there to ground that seating area?

I think that rug makes the room look smaller. Either no rug or a rug that fills the room would be my choice. I think, also, remove that table from the window area and put a little round side table (if you need one) out of sight between the chair and the window wall (okay--one for each chair, if you need it). I have these little 12" diameter tables that are perfect for putting a drink on and take up little space. I think some nice, colorful drapes/curtain panels and coordinating accent pillows on the chairs would be great. The goal would not be to COVER the windows, but to draw attention to them (they are great windows!). It sounds like your goal is to be able to seat a bunch of folks for gatherings in the that room or not? What is the main goal of the room?

Bigger rug for sure. Put two chairs facing the TV so they form a right angle to the two chairs facing the fireplace.

This big:

Then move the other chairs to face the TV. You could also use a longer, lower media console.

Definitely think the rug is too small. Sounds like you really like it though, so you could layer it with a larger jute rug, for a look similar to this...

I also think Paula A's advice is dead on.

More pics might help. What is opposite the fireplace. Also, what is the width of one chair and the length of the short side of the rug? Obviously,I am wondering about turning the rug, making a conversation area in front of fireplace.

@hollybar - opposite the fireplace is open. It opens directly into the entryway. So I put the backs of chair 1 and 2 to kinda divide the space up.

@Glo European Windows & Decor - like the idea of layering rugs. It's never warm enough in the midwest!

@Paula A - thinking really hard about this one. This is a transient house for us - maybe for a year or 15 months. So I wanted to bring in furniture I could easily reuse when we moved out. A small loveseat might have probably been wiser. More thinking ....

@groveraxle - I tried that first thing. But we really enjoy the seating by the windows and watching the world go by (or the snow fall in the middle of April) - lol