I would put the TV/VCR on the opposite wall to allow some wall space for a bed / sofa.

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Yup, makes sense to put tv on the wall with the entry door. Then float your sofa in the middle of the room. Maybe put a standing screen behind the sofa with a bed behind that (for some privacy).

I don't understand the closet shown directly opposite the entry door, when you have a large walk in closet. How about a large shelving unit (with desk area?) along that wall?

Mount TV on the wall above the trunk and put your sofa/bed opposite the entry. That means secure restful sleep and the sofa is the first thing people will see when they enter, not the TV. Stick to small apartment sized furniture and multi-purpose pieces with hidden storage, etc.

Keep your colors neutral and monochromatic also. Contrast can make rooms seem smaller.