Can you post pictures of the two flanking walls?
Are you planning on raising the fireplace up or will it be tight to the existing hearth?

Sounds like you are making some good changes!

Maybe tie the tv area in with the fireplace area by using a mantle across the whole space:

We haven't done a fireplace remodel before, so I hadn't even thought of raising it. I suppose it's possible. It is pretty low for the room.

Sorry for the mess! The windows are on the east wall nearest the tv.

If it's a gas fireplace, raising it off the floor and creating a small bench would be a great addition to the room. Also, I agree with pcmom1's suggestion of incorporating the TV into the fireplace design, though the example posted I'm not fond of. The TV in that situation is too low. Since the wall is asymmetrical (different roof slopes and bearing heights) I would design the wall to be asymmetrical as well, to keep a theme. My personal suggestion would be to create two focal points out of the TV and fireplace without making one more special than the other - just different. I like the idea of a large solid wood mantle. This is both contemporary and traditional in it's appearance and feeling of warmth and home-y-ness. I would mount the TV above the mantle, recessed, and raise the fire box to just below the mantle. This will give you an opportunity to display your art above like you do now as well as create some built-in storage below the tv - perhaps for books or AV equipment, etc.
If you need some help in the design, feel free to contact me. I'd be happy to help more.

I agree with 'pcmom' I would consider the TV space and Fireplace as one unit, with a mantle.

I would not have as much brick above the firebox. I would shorten the height above the box of the original and then add a mantle.

Tricia,

What would happen if you left the windows on the gable end - the ones that are behind the tv - and filled in the small dormer on the right side wall. (keep the dormer on the outside) the reuse the existing fireplace opening / position for a new gas fireplace and place the TV on the wall where the dormer currently is located.

This way you don't get two major focal points fighting it out for attention on the one wall. A combination built-in fireplace and tv can look stunning, as the image that pcmon posted indicates, however, the size of the tv is relative to the size of the fireplace box - think proportion. If you decide to go with a 50 or 60" tv or bigger, then you throw the whole proportion off and the fireplace will begin to look a bit lonely and inconsequential next to the larger tv.

You could try moving your tv and stand to the dormer wall to see how that feels. And pull your sofa closer in. Although I am guessing that might encroach on the play are. But try it and see what you think.

What are the dimensions of the room?

What do you think of this idea..see photo attached? I think it would look great to do an asymmetrical stone fireplace, with a larger t.v. cabinet on one side. You would not have room for the smaller bookcase on the other side as shown in my photo however. But add a matching wood mantle and it would really pull it all together and create a beautiful and dramatic focal point to the room. I would go as tall as you can with the t.v. cabinet to fill in the vaulted wall. Otherwise you could also add a window above the t.v. cabinet or just use large decorative accessories above the cabinet to create balance with the fireplace. The only other option would be to see if you can move the fireplace to the center of the vaulted wall, this would create symmetry and you could then do built in cabinets along either side.

You can consider using stone veneers to elongate your fireplace to the ceiling, giving the wall more interest. Add cabinetry around the fireplace and window for more storage and you can move the TV to the west side wall opposite the windows. If there is enough space you can consider placing the tv on top of the fireplace but you don't want it to look to crammed with the low ceiling! Here are some examples of fireplaces we have elongated to accommodate for windows and high irregular ceilings. Find more examples and stone at www.erthcoverings.com

you didnt mention the lighting.... all that black track fixtures, and dark fan, my eye goes right there...switch to white new modern track fixtures that are much more low profile. and if you are keeping a fan in the space, i would go either stainless, or white. also you can change out the eye ball trims on your opposite wall, with lower profile versions as well.