You need an apartment size sectional placed with the front towards the fireplace were you can walk behind it it were the new wall will be,have you tried adding more insulation? Rather than give up space? ,also a small credenza to the right of the fireplace with the tv on it would work with new smaller sectional and new placement ,but I would add more insulation and keep the area open

Hi Ann, thank you for your comprehensive replies, I definitely prefer a neutral palette as I am attempting to make the view the main feature of the room. I love the style of the coffee tables you chose, they are exactly what I have been looking at and agree with your comments regarding the entertainment unit, I have been actively looking for a long lowline unit (220-240cm length and 45cm high)as I wish to minimise the obstruction of the view. You definitely have a knack for picking up on the look I was after!!!!. Thank you again for your assistance.

sounds like some bean bags and/or covered single mattresses might be useful for crash landing, seating and spare bedding...check out the thick foam mattress that can be stacked to create seating or spread out on the floor with floor pillows, keep all the bookshelves but swop the "tall" table for a low (coffee table height) for kid's work table while sitting on the floor (ideally the mattresses and a folding table could be stored in the wardrobe (like Japanese tatami mats?)

I think you need to change your thinking from 'living room', to 'generously sized entry hall' as you have so many doors and walkways through this space it's hard to imagine it will be a cozy TV nook. I would place a pair of comfortable armchairs towards the corner to the stairs with a round rug to help create a zone within the space, while still allowing a flow around the space for people entering the house. You might also have a side table and ottoman to complete the grouping. Good luck