it would look best if you just drywalled over it. It is very '20 years' old. lol

when you're ready to redo the fireplace, just have it all done at once. perhaps you could do new tile and take it all the way up.

it would match your modern style more, like your media console.

you could completely open up the right side and do shelving (like this one) and take the tile all the way to ceiling. (ignore the left side and tv placement)

you could also do a smooth stucco finish and leave the right side open for a little bench.

Drywall. Make it disappear.

Beautiful ideas. Oooh so to achieve a better look, I‘ll be getting rid of the shelf and lights. Wasn’t ready for that, but I do see it.