Unless you are planning to have more kids the palyroom is a fleeting thing so IMO go to a sleeper sofa and 2 choirs for furniture I love leather where ever food is consumed and kids play. Besta from Ikea makes a really nice system for storage TV and a bit of display if you want it and the pieces can be put togrther to look custom.I find it better to put the play area in one space and the tV in another and for sure that is what I would do if you are planning on using this space for guests, no one wnats to step over toys to go to bed or to the bathroom. If you post a floor plan of the whole area to scale you might get some good ideas here.I am not sure how old your kids are but a huge chalk board might be a good addition too.

Kids are 2 and 5. I think it will naturally turn to a tv/chill zone for them and there is a bathroom attached which I love! I hadn’t considered 2 chairs. Would you do one on each side of the sofa or two together on the back wall?

That will depend on the room size and shape so that floor plan would be good.

Heres what I measured!

I put it in powerpoint for easier viewing!

I agree that playroom age is fleeting, but it can become a movie and hangout room for tweens and teens. If there's enough room, a true U-shape sofa is nice. Room and Board and other stores make sofas that are large sectionals and then ottomans fill in the empty spaces to create large lounge/sleep areas. Might be a compromise. If this is always going to be a hang-out area, then sectional will work. That said, if you think you'll move in the next 3-5 years, sectionals are notoriously hard to fit into new spaces. I'd get some room darkening shades for the windows

Totally not to scale - but here is where it is now (homework station is in the works

Here is what I had in my head - but apparently it's SUPER tough to find a U-shaped sleeper sofa that's less than 4-5K (and I hate spending so much on something that is going in a kids space). Soooo, that has me wondering what other furniture layouts might work better for us

OR maybe I do a regular sleeper sofa and two club chairs? or a chair and a half? I'm going down a rabbit hole here LOL

@gcubed it’s a home we plan to live in for quite some time. We just upgraded to this house so we can host family gatherings more easily since we have family all over, but that also means I need this space to function as an extra sleeping space a few times a year and as our family ages air mattresses become more of a challenge to get in and out of sometimes so I was really hoping for a sleeper (or trying to sweet talk my husband into a Murphy bed LOL!