Generally what is your decorating style?
Firstly, the soffits are fine. In regards to creating a cohesive look between the fireplace and the reading nook, repeat patterns and/ or colors. I would go for a dark wood mantle and then get a bookcase in the same wood. Use the same colors for decorative accessories, so if you'd like a purple couch, but a couple glass vases to place on the mantle, or put a piece of artwork above the mantle and pull those colors into the reding nook, by way of couch fabric, or the rug or even by papering/painting the back of your bookcase. Also, the bookcase doesn't need to be full height, it can be waist height. You have plenty options, and I can advise you more if you give some information on your style and color preferences.

This room is connected to the billiard room (on left side of fireplace) and we have found a gray color that we will be using in both. (Accent wall of another darker color perhaps in this room for more warmth) ?? We are also putting wood floors in and white trim. (That's the plan anyway) we are just trying to incorporate a somewhat rustic theme, fireplace, and reading nook to go along with my taste of rustic and his taste of traditional. And figure out how high and what color wood/wall to use on the nook. We were thinking of making the area with a built in "window seat" and having open space under to keep firewood. The right side along the wall would be where we'd have shelves or something to keep the blurry, dvr etc.