This is a really awkward space! What about trying to build a unit into the corner which seems to be dead space. This could house the television and other bits like dvr,amp etc. The unit could then extend out towards the door in length and in height either up to the start of the window or up to the start of the blinds. I would suggest drawers for toy storage and books above. In this way you leave the windows clear for light plus it looks like you have a pull down screen so the tv would be out of the way of that. This arrangement would also hide all those wires and cables! Ikea have some good examples of storage which you could adapt or copy, such as Besta which illustrates the extended toy storage. http://www.ikea.com/gb/en/catalog/products/S39927155/

You have lovely pieces to work with. To my mind, it appears you have a long and a short MCM credenza/buffet. I'd prefer them switched and then move the art pieces so they take up no more than 75% of the credenza's length. Also keep them closer to the furniture and lower than the door and window frames if possible. Red is a wonderfully appetizing color and I'd love to see it on the dining room wall as well, although I know it may make the air unit more obvious. The dining wall is the one I'd fill with a bookcase for the cookbooks. As a one-time owner of nearly 100 cookbooks, I found they made for great dinner party conversation, along with an unabridged two-volume set of the English language dictionary. An IKEA bookcase could work well and hold plenty of books. The white shelf system with the red wall behind and the backs of the shelves painted red would look great! Or you can paint the bookcase red and leave the wall white. Group books by color for another touch of fun! Don't forget to show off some great "foodie" accessories too.

Well, for lack of a better idea, since you find it a drafty little space. I'm assuming the draft comes in on the right? Most of the necessities in the area are located of the left side; i.e. vent, thermostat, light switch etc. What I would do I think is caulk up the drafty spots, maybe even add sized poster board wrapped in batting I covered in a gorgeous fuscia with diagonal grosgrain ribbons every which way covered with a heavy velvet to be attached to the area above & below the window. (Of course remove the drapes that are hanging in there). This for the purpose of using it as a pin-it board for notes. Attach a table height board covered in felt to carry across the full width of the little room. Leaving just enough space for a comfortable little antique desk chair. Paint the back wall a bright cobalt blue, paint the ceiling a silvery pearlescent white. Find a way to attach a clip-on task lamp. And stretch a heavy duty enough wire across the top of the opening and complete it with a heavy doubled velvet drape with a drooping valance. Place a swag with fringe & jewels on it to be closed when not in use. Voila intrigue is yours!

Wow, that was awesome Mark, thanks for that and everyone else. I thought about the desk facing the other way actually, to avoid feeling enclosed I do have really great views there so I thought about a small couch and maybe a bookshelf on the back, but having the dining table in front is probably not the best either.... complicated :( Here are a couple more pics, today was a beautiful day so I managed to get more of the views