I would demo the hearth. I did that in my previous house and had no regrets.

It seems odd the chairs do not face the FP but I think your Mom is right in a tiny space a pad on that hearth is great seating it makes extra seating with no cost except for the pad.

I would demo it. How often do you need extra seating? No way to put a pad on the hearth as it it is - too close to the FP. In my reality (same type hearth) I'm the only one who ever uses it to sit when we have large groups. It too hot there if you have the fire going.

Yes, get rid of the hearth! if budget constraints, Just add a wide trim board to finish off the bottom of the cabinet until you have a solid plan. Without the clunky hearth you may even be able to add more seating in the room.

I'm another vote for demo. It's so much less overwhelming and the new built-ins would give you great storage. Where would you put the t.v. if you change the built-ins?

@katinparadise I think I’d lower the mantel and try to put a TV above it on some sort of arm that can move downwards and pivot. Otherwise I think we’ll be straining our necks while watching TV

I removed the hearth in my great room as well.

If it's a gas fireplace, building code dictates that you have 12" of non-combustible material above the firebox. You wouldn't have much room to move the mantel. The t.v. on a movable mount wouldn't be too bad if you can get it low enough but you need to check on how far out they can project so you can clear the mantel to lower it. Perhaps a Frame t.v. or one like it that will allow you to put a frame around it and art on the screen when you're not watching would look better than just the black hole of the t.v. The art you show over it now is pretty and I'd hate to see it replaced with just a blank t.v.

This would be my favorite:

Run the hearth across the entire space and leave what is left of the recess just plain.

I would remove the hearth, and never paint anything else gray.

You do know you will then have to deal with the flooring too. As for the cushion of course not there all the time but handy when extra seats are needed .

Remove the hearth and take the cabinets to the top.

I would remove the hearth. I woud also suggest adding a speaker cabinet that goes to the ceiling to "hide" the current speakers. You can use speaker fabric - or use a wide metal mesh that doesn't distort the sound + provides enough air circulation.