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I would relocate door and entry to be beside bedroom wall and maybe add a wall to define the spaces. The 'new' entry area could be made into a nice area without being too big. It could be 1200 wide and 1560 long, just enough to circulate guests into the house without walking directly into the middle of room. Certainly not a cheap or easy option but it would be the best outcome overall. It will completely change the dynamics of the whole area! I don't think that any furniture layout will be a clear winner as they'll always be a compromise, even though the options as shown above are very very good.

think about fencing some hard floored area with a simple baby gate (available on kmart, target, bigW and on line) ...if he has his favourite bed and toys in the temporary goal, combined with strict regular training and walks he will eventually get the message but you must always respond positively when he does and make a restricted space so accidents only happen in a restricted area...i know our dogs are special but they're quite happy in a small space all day as long as they know they can expect your attention and a walk when you arrive home or, weather permitting, a morning walk is even better and they can sleep all day...I was never happy to allow my dog to be left outside alone as they can have injuries (especially if you have tempting rodents to chase) and a special dog like Mace might be tempting to a thief..keep him inside unless you're outside with him

The pivot doors that Julie has posted are out of character , and like most posts so far , I like the existing door . However , being weird , I'd leave the flyscreen , and the frosting -- I think it all suits . Maybe needs a coat of paint -- imagine the 2 lower exterior infill panels on the door in a bright red or orange to lift the look , tie in with the brick , add some colour ? Or do the whole door and the wrought iron scrolls of the screen in 1950's pastel mint green or apricot -- the reverse of modernising ! Also unlike most , I don't particularly like the wooden panels above the door and the bay window -- I know some will scorn , but I'd either plaster smooth , or maybe go with glass ( yes , frosted ) with little net curtains -- I suspect the outside view of this isn't really visible ( under a veranda I gather ? ) but to me , it would tidy the inside look , look period , and tie it all in . Then , add a red leather lounge suite or chairs ( depending on that rooms use ) and at least 1 big colourful abstract painting -- that is the way to add class and colour and some modern looks IMO , not by adding an ultramodern door to what is essentially a 40 year old house . Just my thoughts .