Yes, the TV should go back to the left. Leave area above fireplace open to allow for items on the mantel and artwork or mirror as @Home Interiors with Ease noted.

The tv will stay where it is. Too much work when into that. :(

It’s mounted above fireplace and I like that look.

Than I would drywall and close up that area…only way it will look right.

You could build shelves in that niche, or place a freestanding piece of furniture, like a tall bookcase or a console table with artwork over it.

That’s what I was thinking. Shelves and then an art light.

If you're keeping the TV where it is, build in closed cabinets on the bottom with open shelves above it.

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Could you close it up with drywall on the living room side, and open it as a useful closet on the back side? Maybe the space would be more useful in the other room.

I'm not one for decorative shelves. YMMV

add a built-in bar? It will need to be something custom fit so that it looks "intentional".

I'd drywall over it. I think all of the below sections are going to look off balance next to the fireplace and whatever lives above it.

That TV is placed so high it seems comical. I know you designed it this way, but it is really out of whack. I'd place the TV on the art wall and hang art above the fireplace.

IMO you had much better places for the TV and still do. As for those niches cover them or have some custom builtins done I guess. Honestly this needed to all be figured out before the FP was done and when ever someone says we are not doing something it stops the flow of good ideas .

Here are some thoughts

Good luck!

You might like the look of the tv over the fireplace, but you won't like the neck pain you get looking up at it when it's on. Televisions should be at eye level for best viewing. But if you won't move it, built-in shelves in the alcove is the obvious way to go.