Right now it looks like a toy room. There is IMO no way to have guest room/ teen hangout they in no way work together. I think you need to narrow the choices to what you need the most.No matter what you do those drapes have to go and window coverings aresomething you choose at the end of the decor.You have a FP does it give off heat ? If so then your window coverings should be able to deal with any cold air from the windows. Are thos patio doors or just windows. I need some idea of the rest of the house as to style for sure.

If you use leather furniture, and I know everyone doesn't, since I myself am a vegan. But people use leather and it can be durable in heavy traffic spaces. This is a queen sleeper sofa that could do double duty for teen seating as well as guest accomodation.

https://www.raymourflanigan.com/raylen-queen-sleeper-sofa-260202860.aspx

And these curtains are a linen look, and are insulated.

https://www.amazon.com/gp/product/B01MU2UGMQ?pf_rd_r=VZHNZBCYGEWS6M7XPW98&pf_rd_p=edaba0ee-c2fe-4124-9f5d-b31d6b1bfbee

And maybe a couple of swivel chairs for seating group with sofa.

But the first thing I would do is clear all the toys, etc out of the room. So you can start fresh.

Would consider a Murphy Bed on that blank wall. This is the one I just bought so I could convert my guest room into an office/exercise room/guest room. Comes in twin, full, or queen size and accommodates a mattress up to 11” high so your guests get a real bad and you lose very little room to the guest sleeping function.

Use insulated curtains to help keep the place warm. A quality pull out sofa is the easiest way to allow conversion from family room to guest room. For the kids, a sofa, a tv and a game table.

Oh so many directions and choices to be made. I would start small and the theme I think you already have is art.
Try placing the furniture you already have into a workable conversation area and then start treating the walls like an art gallery. Live with it that way for a while taking mental notes on what works, what doesn’t and make adjustments. Keep doing that until you have a baseline you are comfortable with and then add or replace furniture slowly. Always, always be aware of what works and what doesn’t.
This has always been my method. . . drives my husband a little nuts but the end result is really comfortable and exactly your style. And, he always loves it.

Turn it into a teen lounge and get a sofa bed. Sounds like the need for a hangout is greater than the need to house overnight guests. This is a good compromise.

Thank you for so much good suggestions. It is not a patio door. Sofa bed or a Murphy bed sounds like a great thought. I would try to keep it minimalistic because of the space size in general.

Do you need accommodation for very occasional overnight guests, or someone who stays for a few weeks regularly? Or something in between? Room darkening drapes would be good.

For teens, would they use the table and chairs for puzzles, board games or laptops? Maybe a small refrigerator for beverages and a microwave for popcorn? Or would gamer chairs be used more?

Post a drawing of the room with dimensions and you'll get more help. Blue would look good here for the curtains, sofa etc. But before you buy more furniture, move your existing stuff where you think it should go and try it out. First job is to clean out the things you won't use.