In addition to my post above...having lived with a fire set in a wall for many years with a vent to let the hot air into the room...I'd do neither of the above....except maybe old cabinets of well seasoned timber and not new built ins up against the wall enclosing the chimney. The heat from that fire and from the vent would affect the cabinets, dry them out, make them crack...especially since timbers today are not well seasoned as when the fire place was built....That enclosed chimney/flue would radiate heat as well...There's a reason why the walls each side as well as the timber shelves are a dark colour and there's nothing built into the spaces on either side. Installing the cabinets and painting them a pretty light colour might look good for a while but not if you intend on making good use of that lovely fire place. I've lived in my current 1900s house for 32 years and have come to know the why's and wherefore's about timbers and heat in old homes. One longs for a lighter environment sometimes but this needs to come from other sources rather than anything against the fire place. Its a bit of a blocker to renovations at times but again, with Wuff, "Embrace what you have"...read up about homes of the same period, surf the net...you'll find some beautiful solutions. Here's one....you could clad the walls either side of the fireplace with a fireproof stone cladding...enlarge on that...may not be your 'cup of tea' but for what its worth in making your place "yours".

Can't see the room layout, but if you keep it, it could be a nook for a sofa or chairs by the fire on a cold night, with a rug in front. Definitely have a mirror on the mantle. Think about walls and rooflines before you do anything. Or if you've got lots of cash to splash, take it out as it may serve no purpose with a heatpump in place. Replace roof tiles, internal brickwork.........you see what I mean, just saying......

By viable I mean workable, functional. A chimney sweep or a builder adept in chimneys will give you a report. Certainly enquire about a future gas fitting rather than logs if possible. I say this as a fireplace anywhere is delightful and, if downstairs, it could heat upstairs through the house, to a certain point too. If you look at the quality of the brick laying, you will see that its not meant to be a feature which is why it was rendered, but that is choice only. Certainly seal the bricks. Good luck and stay with it if you can. Everybody loves the romance of a fire.

Where it's always been I hope, just kidding. One thing you find on Houzz is the"Brief" is very brief so you don't have much to work with. With what was supplied and that the property was being "considered" for purchase, I wouldn't go any further. The current floor plan needed opening up which I did a rough layout for. the internal room could be kept if they wanted, just by using one of my favourite things, full height cavity doors/Barn Doors forming the corner of a room/rooms, no need for windows, could have an opening skylight if needed as per attached. If they purchase maybe the will look to extend, next chapter.