I totally agree with Carolyn. I would fill in all the spaces too and I love the linear stone on the picture! I think this is an excellent idea. You could get a wall mounted tv table or a nice tv stand. I am assuming there is a window across from the sofa or to the left of your picture? Can you rotate the sofa to face the fireplace?

My friend used to have an almost identical set-up that she adjusted due to similar concerns...wondering what your budget is? She did a very economical change up by covering the whole wall with stone and a bit of molding around the fireplace and nooks. She covered over where your TV spot is now and placed a TV in the large space next to the fireplace. Then she paid a carpenter to build cabinet doors that close over the TV space. They were built with retractable hinges so that after opening the doors, one can push them on their tract back into the TV nook on each respectable side of the TV. She left the space above it slightly trimmed out with matching trim and showed off some small pieces of art. It's a very sleek, calm look.
Alternately you could do it without stone at all. You could have a carpenter enhance the mantel , cover the current TV space with drywall and cover it, trim out the other nooks and add the hide away doors for a similiar look.

Whoops, almost forgot that she changes up a large pice of art over the fireplace to balance out the shapes. For example she started with a large sunburst mirror over the fireplace and has since tried a variety of others depending on times of the year.

Agreed! A good sheetrock person can enlarge the niche to the right of the FP, and fill the empty areas. An asymmetrical FP/tv space is it! Imagine this..but sheetrock, instead of cabinetry.

Thank you all. The photos shown by Carolyn and Dazy look nice but IMHO they are doable in those setups only since the sofas are facing the TV. In my case, the sofa needs to remain where it is due to space constraint. I am fine with either ledgestone or linear stone. I might be wrong but in my setup it seems the TV needs to be mounted above the FP (be it where the FP is now or shifted to the right).

I will appreciate more ideas.

mk69, is there anyway we can see your friend's setup?

ztfaztfa...I think you may be thinking in "reverse design". Usually, furniture is chosen to fit the space, not redesign the space to fit the furniture. It doesn't look like the sofa location is optimal tv viewing in it's current situation either. And, the tv is currently in a too high location for optimum viewing even if the sofa faced the tv/fireplace. Can you show the other side of the room? Perhaps your sectional can be rotated 90 degrees for optimum TV viewing? Then, an accent chair left of the sofa?

I will take more photos and share them this week. The sofa was recently purchased and it is over-sized. I don't mind selling it for a loss but there is no guarantee it will be sold any time soon. Anyway, I would like to have some opinions on how to leverage the current setup with just lowering the TV and somehow accenting the wall and then consider other options.

Another suggestion was moving the FP to the left corner (diagonal), close the nooks and place the TV in the middle fo the wall. I am not sure how easy/difficult it is to move the FP

I would be cheaper to buy new furniture than it would be to move the FP! Can you move the tv across from the sectional and simply put on a tv console?

http://www.interiordesignphotos.co.uk/wp-content/uploads/2010/09/Recycled_Wood_Montreal_interior_design_photo2.jpg

Darzy, right across from the sectional are the windows.

Amy, sorry what is this picture supposed to mean?

If you will note, ztfaztfa, I did mention placing your TV above the fireplace. The photo I posted was to show you the fireplace and not how to position your furniture. I suggest you look at the fireplace in that photo and consider remodeling your fireplace to have a similar look.