Here is photo

That is a very 1990's design. When budget allows, I would plan to remove all that drywall and start over.

I agree a full demolition of that mess on that wall then a nice clean slate where you might want to check out Ikea Besta for TV, FP some good storage and a bit of display. The pieces can go together so that it can look custom and for sure no TV above the FP

Maybe just sheetrock over the arched niche and use the upper side niches for speakers.

So you want her to spend $$$$ to purchase speakers to fill a niche?

How big a TV does one need? more than 50"? Yikes.

For this size room, to create a more theatre like experience, I think a 75" screen is reasonable.

It all depends on how you arrange the seating.

Enclosing only some areas doesn't leave you with an attractive result.

Okay but I see speakers anyway. But we don't know if they even want to do any work. Bookshelves for the side rectangles. Collectables on top?

Thank you to all who took time to give some advice.

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