This seems like the most reasonable furniture arrangement for the space. Of course, the loveseat would have to be at the east side of the room so it would open up to the kitchen and not the formal front room. I'm not sold on the particular furniture, but at least I have an idea now.
Traditional Family Room Design, Pictures, Remodel, Decor and Ideas...I like the arrangement of furniture and its what I have already :)
Storage - love the shoe cabinets at the bottom and the mirrored bench seat