Your money may be better spent on making that a feature to the bathroom & study & internally with a window as the nice focal point since it is due west. Small bedrooms won't matter so much with improvements to the living rooms though you might be able to bump them out under the eaves but slab homes don't usually extend the slab beyond the footprint. Then extending the living area towards the east to introduce the interiors to that beautiful aspect, despite the drop off of the yard maybe singular addition is cheaper than knock down of interiors & plumbing etc. Might be able to step down a few steps into an amazing living room????? I would be mindful of what you will see when you walk in the front door & if it could see through to the yard that is always pretty cool! Piccy just for inspiration...

answering your questions: change the sliding door to a bench height sliding window and use the salvaged sliding door in the western end of the dining room where the best entry position is for the deck, you MUST have a proper legal drains do not consider anything else...the drain pipe for the garage laundry can be on top of the concrete floor, behind the washing machine and through the sink cabinet and/or under built in storage and only needs a few cms not a whole floor and no stepped up area that you would see or trip over.. the laundry can't be in a separate room as there's not enough space for a separate laundry without compromising the size of the garage...a laundry cupboard 80 cm deep is enough for the washing machine (allowing for the drainage pipe) you could use the old line cupboard to store anything you want but it's not cost effective to change, the entry foyer is already as big as in many modern homes and there's generous flatpac biw space in the small study.... the family bathroom is 2380 x 2370 (ie the old study minus 1m for hall way and wall thickness and, arranged exactly as shown to allow for the wide window there should be space for a bath up to 1800 x 750, vanity about 1200 x 500 and shower space 1200 x 800 and leftover space makes the small linen cupboard with the door deliberately opening towards the shower to use the back of the door for hanging racks for towels and clothes....btw i understood your priority was maximizing separate sleeping rooms and minimising costs...my last plan has five separate sleeping rooms plus the lounge with sofa bed totalling sleeping places for at least 10 people plus the potential for bunks in the garage so you need to decide what is most important and where you're prepared to compromise

it's quite easy to remove tall windows and replace them with short windows for the new kitchen and fill in the gap below the window with a stud wall covered with insulated cladding...it's surprising that the garage was built this way when it could have been extended from the boundary to the side of the house to make a generous double drive through garage with more garden towards the rear but, if it was my house i would enclose the gap with a flat roofed room (with bathroom windows replaced with in wall storage and add ceiling skylights) and, although there is enough room to add an ensuite and wiw in the gap (and/or at the front of the house) for the price it will be much more cost effective to add an extension in the rear garden....in the meantime a reorganised kitchen, family dining and living room would provide much more comfortable space for a young family and a generous alfresco (with umbrella or basic shadecloth covered pergola) at right angles to the house would be better use of that space and could be a simple gravel paved area or a deck that could be recycled if/when you need to add the rear extension

I'll tell you what -- I love 75% of the bathroom -- that rustic style is different enough , and well enough done , to be different but great ! Then the tiles and cupboard doors let it down -- try and stick to the rustic styles there too would be my thoughts . The kitchen looks to have good bones , obviously the benchtop has to go , and maybe a bit of colour and new flooring , but it seems to flow okay , and looks great . I'd probably keep the stainless sink , but onyx marble benchtops would be classy , add more modern tiles and/or a splashback ( depending on colours , how about just basic white square 150 x 150 tiles , with a horizontal top row of black or red or orange subway tiles on their sides ? The lounge , in comparison , is all over the place . Light wood , purple carpet , and ( shiver ) a faded look on the coffee table . Take it outside and shoot it , burn it , it's just wrong ! The lighter wood panel might work , or maybe stain it dark , paint it white -- it depends on carpet tones . A wheat colour carpet , for example , with mid reddy brown stain wall , the bricks under the fire , it would look a bit rustic but with a tinge of class ! So what about changing the rooms ? Here's a quick idea -- The main 'rustic' bathroom could be turned into an en-suite for the 'upstairs; bedroom ( I assume that is the master ? ) , through a walk-through robe . The downstairs bedroom seems to have a shower and toilet ( almost its own en-suite ) but possibly keep the 'direct' door to the upper bathroom , as well as an entry from the upper bedroom , so the bath can be used by everyone if need be . You also have a seperate toilet there too , and the laundry is okay -- you'll spoend money doing one under the house , but not really gain much space , because of the door into the laundry ( I assume that door is useful , but what it does it makes enlarging the kitchen , or moving the bathroom more difficult ) . In other words , no real gain . It looks and sounds like it works okay -- why spend $$$ that aren't needed to be spent ? Just some minor stuff , maybe some furniture , Spend $30k and it will be getting close to what you are after IMO .