I think you've done about the best you can do. When a room is really busy with odd angles, you have to go a bit simpler with the decor and eliminate clutter. I think your mock up looks a lot better than reality because the clutter is gone. For starters, the front door opens the wrong way into the room, IMO. Can you reverse that so you're opening up to a welcoming place to sit and not the TV screen? If you need more seating for entertaining, consider a round hassock for your coffee table so it can double as seating. Use a tray on it and keep it about the size of your table now. The room can't handle a larger one. Place a chair left of the fireplace. Add a large colorful piece of art 5" above the mantel. It can be as wide as the firebox opening. To tackle the wall over the sofa, I would use the pieces you have already to make a gallery that actually just incorporates the window that's there with the stained glass. Center the sofa on that entire wall and then plan your gallery to work above it just like the window does (at the same height and with a similar volume.) Eliminate the shelves. Maybe use them right of the window in the adjoining room, or the kitchen.

Wow, thank you so much to you both!!! very helpful. Any thoughts on a statement wallpaper for the fireplace to make it more charming?

No, I would just paint the room one color and then perhaps the surround of the FP itself a bold color or even faux brick paint?https://jordanjean.com/diy-faux-brick-fireplace/

I think the rug is maybe too big in the direction you have it. Can you turn it so it’s in just the living room there?