SFGate

mtvarlapati Can you post more pictures? I would like to see the other end of this room - that will give me a better perspective what can be done. What are the dimensions of the room?
The TV should definitely go from where it is right now. I understand you do not like it but I would suggest you hook the TV on top of the fireplace. There should be only one focal point in that room.
You have beautiful built-ins.

If you keep the TV where your couch is then you are going to waste that space on that side of the room. Also, the light from the windows will affect you view (of TV).

If the length of the room is at least say 15-20 ft then you are fine with TV being on the fireplace. If you like that idea then arrange the sofa in front of the fireplace where your loveseat is currently and arrange the loveseat in front of the window. The chair can be arranged towards the wall (middle). I would suggest getting rid of that carpet. Its too gaudy and doesn't work with the furniture. I cannot see if that room has carpet but if you do then do not another layer of carpet on top. It will catch too much dust. If you have hardwood floors then try to get a contemporary rugs that is not as big as this one and less gaudy.
I hope this helps!

mtvarlapati My bad I see that you have tiles for the floors so you would need the carpet. The carpet in this link would go well with your room - either Yellow or blue.
http://www.overstock.com/Home-Garden/Handmade-Luna-Moroccan-Trellis-Rug-76-x-96/6660485/product.html

sandj7510 I'm seeing a very nice, traditional (not gaudy) rug that looks nice with your furniture, and can stand up to four kids.
I think a sectional would be nice, but for now, try the couch centered in front of the fireplace, the love seat in front of the window, and the chair in front of the tv. This may be too crowded , but I'm afraid that if you put a bigger tv on the wall with the couch, you will take focus away from your fireplace and built-ins, and will lose the traditional feel of your room.

On the other hand; if that's what it takes to make everyone comfortable, and the room functional...

Emily B Thanks for the comments. I am keeping the rug as it is an authentic Oriental that I inherited, and it really withstands the traffic of four kids! If we put the t.v. over the fireplace, would it be good to have it mounted so it could angle down? I don't know what that kind of mount is called, but I've heard of them.

sandj7510 I have one in a different room that is high and mounted so that it is angled down. It works for our family, but we are not that concerned with the quality of the tv picture. (my dad hates it that way, but he does not come to our house often enough to change it). I'm glad you're keeping your beautiful rug!

JWinteriors I would paint that top tray ceiling the same color as your walls...or a shade darker. Your eye will draw up with color, so the room will look taller and you'll have a dramatic effect. Add window panels on either side of window..Jc Penney's carries affordable solid choices as well as Bed, Bath and Beyond. A creamy linen would lighten the room.

JWinteriors Cocktail table always needs to be centered with the fireplace. When it isn't, the whole room looks wrong. The same applies to the love seat that will come off the wall. That needs to be centered as well. Table with lamp should be between couch/love seat. Chair with ottoman should diagonal from TV corner. If ottoman doesn't fit, Remove it and anything else from the room. Floor lamp should go on left side of chair.

Jeffrey Brooks Interior Design Go for it! Now is the time to experiment before you make a new purchase! The sofa in front of the windows should be pull out a few inches and be sure that this will be safe for the kids.

Emily B JWInteriors, do you mean the coffee table? And which way are you suggesting the furniture be arranged? I understand about having things centered and the table between the couch and love seat, but not sure which way you think I should place it. And keep the tv in the same spot? I REALLY don't want it over the fireplace. I don't have a picture right now of the rest of the room but opposite the fireplace toward the back of the room, it is just open to the kitchen, so there really isn't a place back there for anything. I'm going to go try to rearrange right now. My husband is going to kill me :)

Emily B Jeffrey Brooks Interior Design, are you saying go for the tv on the wall where the couch is right now?

Emily B Okay, I rearranged it two ways leaving the tv in the same place. The first couple are with the couch facing directly towards the fireplace. The next couple are with the love seat facing directly at the fireplace with the couch against the windows (leaving a few inches between the couch and the window). I realize the coffee table is awkward. Any ideas for a better coffee table? Does either of these arrangements look right?

Emily B And if I'm going to arrange like this, should the rug be turned the opposite direction?

carolins To me the bottom arrangement, with the love seat in the 'opening', feels like the best arrangement. No need to turn the rug. I haven't read all the other comments, but what's awkward about the coffee table? It seems fine to me. Beautiful carpet. In fact, I like the entire room. Hang curtain panels and the painting above the fireplace and you're done I should think.
What do you think about the furniture arrangements? Which one works best for you?

Emily B I like it with the love seat in the center because the room is sort of narrow, so when the couch is in the center it feels like it takes up the whole room. My kids came downstairs this morning and said they liked it. I will have to see how we like walking around the love seat to get in the room. We were used to the openness of the other way. How does this way look compared to the way I first had it arranged, regardless of the functionality of watching tv? I want it to look right and put together.

Kelly Perfect!

stephmalachowski Your new arragement looks great! Either the loveseat or the couch works in that position, so whatever is most comfortable. As for your coffee table, maybe a round one? Do you actually use it? Seems our coffee table ends up serving as a footstool more than a table - so maybe a leather ottoman with storage? Just ideas- I think it looks lovely as is!

Emily B I was thinking a round table. The current one just seems so big. Since I have a toddler, I don't use it for anything decorative so it is mainly just a footstool with baskets full of books underneath. I could try an ottoman as well. Thanks for the help! Sometimes it just takes a different set of eyes!

carolins Target has a round leather storage ottoman :-)
http://www.target.com/p/threshold-nolan-bonded-leather-with-nailhead-round-storage-ottoman-espresso/-/A-14138298#prodSlot=large_1_4

Jeffrey Brooks Interior Design Yes, move the tv

Emily B Any other ideas on window panels. Would a linen color or off white look too blah with the greige walls and brown couches??

Jeffrey Brooks Interior Design Given that this is your family room I'd suggest you use a great looking window shade. Matchstick or Bamboo shades would work well here. For some color and interest, paint the interiors of the bookcases. If this is too risky for you then think about accenting the wall where the TV is going to be placed.