Sectionals are IMO the most expensive way to buy the least number of comfy seats so the one you are looking at gives you 4 seats but 2 of those are armless so like sitting in the middle cushion on a sofa and the corner in useless. I think you could do 2 sofas facing eachother that would give 4 comfy seats and 6 in a pinch . The fact it no one in thta space faces the TV so if you have another place for TV I would remove it from this space . Can you post a pic of the whole space from further back too. A rug would be nice but you choose that after the seating . If the TV goes then maybe a small electric FP for a focal point with a nice pice of art hung above so a linear style FP Since this is asmall space I would avoid styles with huge arms and look for wider seating instead .

I added 2 photos to show you the whole space. I have a large mirror on the long wall and at the entrance a piece of art. At some point, we thought to put the TV there, but not sure maybe it's too high.

My first concern is that a toddler could climb over the back of the couch and fall over the stair rail. So I would not put anything in front of the railing that could be climbed on. You are probably already thinking of this, too.

Yes, I have think about this. I will use a small playpen in the center, so the table will be gone. Later on, I will move it to the basement play area.