No to velvet curtains. With your kids ages and fun toys your current cozy will be add lamps for ambient lighting, throws and pillows.

Can you help define what a movie theater means vs a cozy TV room? Not sure I understand that term in this context.

For a cozier vibe, paint the walls a darker color, put the lights on a dimmer if they are not already, and get huge floor pillow/bean bags for the kids to sprawl on.

I like the idea of curtain panels. They don't even have to close, they can just provide a bit of visual and mental separation. Them on either side of the opening to the exercise area -- so behind the sofa on each side.

Paint and some LED strip lighting and movie posters & a small beverage fridge. You could put up a decorative folding screen to separate the gym area. Agree on the curtain unless they were on tie backs!

Here is an idea

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the drape like the one by the tv, can be at the back of sofa with tiebacks instead.

Some inspro

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