Would you consider putting the TV and its console angled across the corner to the left of it's current location? The sofa would also be angled and parallel to the TV. Your current sofa might be a little too long for that and it might be awkward to move about the room - hard to tell in these small spaces til you try it. Or you might try the TV between the 2 windows on the left wall with the sofa again parallel to it - walk behind the sofa to get to the dining/kitchen area. That way the sofa would also face the front door and be welcoming or at least inclusive of someone walking in. Does the table have a leaf that could be removed to make it smaller? If so, try that and put the extra chairs around the living area, and the leaf could store under the sofa or under your bed. Once you get the big pieces arranged so that you like the look and flow, you can fill in with smaller pieces, rugs, pictures, other items. If possible remove the stool and pile of books on it as well as the pile between that and the TV.

If you have a lounge with a chaise it will not fit five people comfortably. Someone will be always having to put their feet up, and guests may not want to do that. I would have a two, and a three seater, at right angles, and single lounge chairs you can bring into the space if needed. This will allow for a table in corner, which you can't have with a modular corner lounge.

Without sizes of the furniture and the wall sizes it's almost impossible to suggest much . IF everything is to scale , you probably can't have a 3 seater couch , because even if you put it along the 'picture window' side , there doesn't look to be much room for a TV and cabinet , and definitely not speakers and turntable , on the opposite wall . Spin 90 degrees , and the TV would go between the entry and bedroom doors , but the fire is in the way of a couch position ( 2 armchairs would be okay by the looks ) ; likewise the couch along by the window is then at a strange angle to everything , but the stereo along the other wall may work , although wiring behind the fire mightn't be best .

So if you’re setting up the formal dining as an office, what is the study going to be? Proves that a home with lots of rooms is not an advantage. You could have less rooms and a better space. You said you have two toddlers, so I would set up their play space with tv, in the music room, away from the awkward thoroughfare. with all the toys they probably have it will be a contained space. Use the formal lounge room as the theatre room. Or the other way around. If they are eating then they do not need a tv to distract them.You say you only have two children, that’s a lot of rooms for two children. Use the awkward thoroughfare room as a lounge room to talk, away from any tv.