You can see why so many people put the TV over the fireplace, it makes rooms easier to arrange. TVs over fireplace are not liked by some however, b/c of the heat possibly voiding the TV warranty and the too high problem of the TV over the mantel. I'd keep the same sectional sofa & placement but I'd move the sofa more to the center of the room so the center of the sofa was looking at the center of the TV. This will make the fireplace less of a competing focal point, by ignoring it. I would then turn the fireplace into a greenhouse! Place many plants around the hearth (pothos are easy to grow), & mantel of the fireplace, this will add some green color and "life" to the family room. Eventually the kids could be in charge of the plants (water, fertilize), this would be a useful job they could learn many things from. I'd add a plant on either side of the FmRm entry on the ledges, too. For kids or limber adults, I'd add several beanbags to the floor area: a gray, a taupe, a black, to unite the beanbags to the colors in the room. I'd buy some low wood cabinets in the color of the entertainment center, for a wall of "built-ins". You probably won't need any other furniture, but 2 chairs in front of the built-ins would look OK. There are tons of choices for decorative chairs. These chairs are nice b/c they have wood like the entertainment center and can be upholstered in anything, but I'd probably chose black leather. They do not take up much room and are pretty comfortable A Breuer-type chair in black & metal is always stylish and adds dash to any room http://www.krembo99.com/the-wassily-chair-3d-by-marcel-breuer/ I'd buy a more daring & dramatic ceiling fan http://www.google.com/products/catalog?q=ceiling+fans&hl=en&client=safari&rls=en&prmd=imvnsr&bav=on.2,or.r_gc.r_pw.,cf.osb&biw=1280&bih=617&um=1&ie=UTF-8&tbm=shop&cid=2098912336853969370&sa=X&ei=CG0kT4r2AajniAK57Y3cB

continued I'd buy a more daring & dramatic ceiling fan http://www.google.com/products/catalog?q=ceiling+fans&hl=en&client=safari&rls=en&prmd=imvnsr&bav=on.2,or.r_gc.r_pw.,cf.osb&biw=1280&bih=617&um=1&ie=UTF-8&tbm=shop&cid=2098912336853969370&sa=X&ei=CG0kT4r2AajniAK57Y3cBw&ved=0CLABEPMCMAM#ps-sellers Along the bare wall I'd hang 3 wall decors in a row to point to the entertainment center as a focal point (reinforcing the entertainment center's focal center importance): Blown up professional facial close-up photos of your individual kids would be my first choice OR 3 round mirrors would be my second choice, the round mirrors would echo the round clock and also would reflect more sun into the room from the windows I'm not a drape person, at all, and I like your window treatments.

Perhaps consider purchasing two of the same couches and face them towards one other with a coffee table in between them. Move the TV/armoire to the current blank wall. Now your focal if you look to the left is the TV and if you look to the right, it's the fireplace.
If there's space, probably not, you could consider a pair of comfy chairs by the fireplace facing towards the couches. If there's not room, perhaps a comfy chair (and ottoman?) with a floor lamp in the corner by the fireplace.
Also, again if there's space, you might consider a narrow sofa table behind the sofa closest to the kitchen island.
And then you'll need some art to carry the large blank wall, where the TV once was...
I'm not a design expert but this is how I see the room! :)

I agree with Jenson about putting the tv on the wall opposite the fireplace. I would put a sofa on the back walk (possibly with a sofa table behind it with lamps, etc) and I would place two chairs on the other side ( back of the chairs facing the kitchen), this will allow for a better flow in and out of the room. And if possible I would put window benches in front of each window. You'll have even more seating without having too much furniture and it will allow for storage.