I'd leave the top open OR do a very sheer inset for filtered light.

A larger area rug would be nice to have all the furniture ON the rug.

at the very least, the front legs of every piece.

I would not put a panel there - please explain why you want that. Or, do you mean to remove the blinds and replace them with a panel? Since there is no space for stackback, the panel will always be covering or mostly covering the narrow windows. If that is what you want for privacy, I would do a sheer, but still leave the top portion of the windows unpaneled so as not to have the room be too closed-in. But my real recommendation is not to have panels there.

As for the rug size, I have a 9x12 coming from pottery barn. We used to have a wall to wall rug and recently put in hardwood. We wanted to put something down and used our sunroom rug.
I’ll be keeping the blinds or May replace with woven woods. I need to have some privacy. I thought a panel on each side might soften the room and absorb some noise.

I would add drapery panels to soften the room appearance.

Window treatments could help soften the room. If you decide to do them, it might be best to only use them on the two lower windows. Here are some ideas of how we have used window treatments for our clients.

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