This is my layout.

If some one can please suggest me good dinning and couch setup, that will be a great help to me. Should I completely remove the idea of having dinning table and just use the island.

I did not opt in for the fireplace but yes that is where I will place my TV.

So no sectional sofa for me :(

Can I place the sofa facing the kitchen?

I think your best solution could be to find a flip top dining table that acts as a console table but opens up to be a dining table.

Yes, you could have the sofa facing the kitchen. I'd measure the size carefully to ensure that the right side does not impede upon the dining table area(if decide to put dining table close to knee wall).

You could place a dining table right behind the sofa. This might work best using BeverlyFLADeziner's layout suggestion.