The first thing I would sugest is warming the room up with drapes that seem much needed. Maybe not the whole area but at least the sitting part of the room. But framing the windows & hanging drapes high it will give a feeling of a grander space and more polished and finished. You might also want to think about using some colr on the walls. again maybe not all of them but possibly a strong rich color on the TV wall. I may also sugest removing most or all of the figures above the TV and bring them down to table tops and more at eye's veiws. If you feel a need for something up there keep it very simple and very large. possibly a mission door hung length ways on the wall above in a dark wood finsih for interest. Adding just 1 pair of lamps on the sofa table will also bring a important must for friendly lighting ,a agin making the room feel more home than comercial like as it feels now. I would use dimmers on the wall lighting. Basically I would treat the two areas as two rooms. So try these ideas for starters.

I am thinking some low cupboards on the eve wall and make this end of the room a bit of storage and a casual seating area, the kids can sit, read relax, play music and watch dvds and store some of thier favourite toys etc a large floor rug, low chairs and bean bags and large cushions! Then place a long table in the centre and chairs for craft etc, and behind the table under the window a long narrow hall table to display some nice pieces, and a lamp or 2! and I agree some sort of warmer window dressing maybe even a fabric blind if you dont like the idea of drapes although I do think they would certainly warm the space up a lot!

Thank you both so much for these thoughts - really appreciate it! I definitely see what you are saying about making the TV room side more "homey". We do have dimmers on all of our lights throughout the house, and that helps. I really like the idea of a large table in the middle area, and will try it. Thanks again for your input!

I'd turn the play area into a library. Get some shelving, a few comfy low chairs, excellent reading light, and lots of plugs and outlets for all of the digital media. This also has the advantage of making sure the screens are in "public" for the kids' homework (for safety, you don't want the kids doing internet work alone in their rooms). Just make sure you tell them to use headphones or you'll be learning about solving division problems on a number line (thank you, common core :)