I think the first layout is fine. You might want to consider moving the door for the storage room of the master bedroom so that it opens into the hall. That way the kids can use it for overflow storage. Also, that hallway is big enough that I think it could hold a large armour, providing more closet space. (There's no need to sleep in the same room as your clothes, so long as they're not too far off.) Also, don't forget that while the drawing shows kids in double beds, this need not be the case, so there will be more room for furniture (dressers or whatever) in their rooms. Finally, that step to bedroom 4 will not be odd at all. I've seen it in other homes. It looks clumsy in the drawing but it isn't. What you'll see when you come up the stairs is a bedroom door on a slight diagonal. It's only an odd jagged step if you walk like a robot, in straight lines along the wall, which is what your eye is doing on the drawing but you won't do in real life.

There is nothing worse than ceiling-mounted lights--harsh shadows, flat lighting. They are strictly for utility. I would put a large-ish, shallow cylindrical shade on them and put nothing more than a 15-watt bulb in them. Use them strictly for lighting your way as you walk through the room. I agree with Vincent; the chair in the corner doesn't fit at all, nor does the one under the A/C unit (put that one with its mate behind the love seat). And the curtains look smooshed. I think the problem with the bookcases is that they are uninteresting. Did you buy books-by-the-yard? What are all those identical books? They are visually uninteresting. I'd get rid of some of them and get some colorful ceramics/glass/photos. The room is absolutely overwhelmed with furniture. It needs one less love seat. Do you really need all of them? Pushing them against the walls/curtains so tightly just visually emphasizes the fact that there is too much furniture. I don't think a mirror above the fireplace will work. When people are sitting down (which is most of the time), all they will see is a reflection of the ceiling--the plain, white ceiling. Get some real art in there with some color.

Thanks for responding. We're in Auckland, New Zealand and close to the sea. Outdoor living is quite important but it does get chilly in winter so it's a balance. There are three adults and two young children in the household (one of the adults is an Au Pair who likes to spend time in her own room in the evenings). The kids will watch their cartoons generally in the morning and a bit before dinner. Then in the evening my husband and I will relax and watch TV. Right now the kids' toys are in the family room downstairs. We are foodies and like cooking. Generally when guests come over we all hang out in our small kitchen at the moment. The dining table we use for every meal time. We also like the idea of being able to get to the deck from the kitchen, rather than having to carry food in summer through the lounge/dining. The entry way is that big in order to reduce on the structural work but also in order to ensure that the door to the staircase is not in the lounge.

windows in master bedroom need to allow views and privacy and much as i would prefer bed on NE this keeps the bed in view towards and from family room so prefer bed on south wests wall and small sliding doors pushed towards north side of room with tall narrow window beside sliding door and highlight window for light with privacy and wall space for chest of drawers...acknowledging theta the pwdr doesn't have a window but my suggested arrangement uses less total space more efficiently and is better for older kids and long stay visiting parents (more people can use the various options at the same time) and a small ventilating skylight will exhaust and brighten the toilet and vanity area ...the wide door into the lounge can be a stacker or stable door so you need to investigate local options (and everything is expensive unless it does what you want...we always use solid core doors that can be ten times the price of a basic hollow core door but love them so we economise elsewhere) and barn door between entry and family would be OK as long as you like them and it doesn't compromise lounge doors but could look ok if both doors are the same style and different widths...and location of dishwasher is personal and if you have already been unhappy with sink in main kitchen then have it in the scullery...main advantage of my suggested kitchen location is that it's closer to the front and the family area and external doors and the pantry uses the central space that can be much better illuminated with another ventilating skylight instead of a tiny external window and noisy exhaust fan