I am wanting to purchase new furniture for our living room, but I don't know if a sectional is the best choice, or some sort of sofa combination. Nor do I know where to put it. I know pushing the furniture out against the walls isn't the best plan, but that's where it is right now. The kids use lawn chairs in the middle of the room for playing video games & watching TV. We need some storage too, again, not sure where to put it though. I'd rather not move the front projection theatre system & screen if I can avoid it. Here's a photo of the room I took yesterday, and a floor plan showing windows and doors. Any ideas?
Image 
Floor Plan Layout
Comment Guidelines
We welcome your feedback on Houseandhome.com. H&H reserves the right to remove any unsuitable personal remarks made about the bloggers, hosts, homeowners and/or guests we feature. Please keep your comments focused on decorating, design, cooking and other lifestyle topics. Adopt a tone you would be willing to use in person and do not make slanderous remarks or use denigrating language. If you see a comment that you believe violates any of the guidelines outlined above, please click “Alert a Moderator.” Thank you.
Yup, OMG is right. I hadn't considered a Pit, U shaped sectional before, I'll play with a couple of floor plans involving that idea. A lot of the problems in the room are from lack of storage, so we will probably put shelving along the stairwell wall to hold the home theatre components, books, games & dvds. Then pulling the furniture away from the stairwell to make a "hallway" behind it sounds good. I liked the idea of a swivel chair so that a person can either watch a movie or have a conversation.
I thought of a regular sofa along the stairwell wall and then 2 swivel chairs across from the sofa so that they can either face the tv for playing games or turn and face the sofa for conversation. Also, you really need to declutter and try hiding all the wires, etc. Maybe you can find a piece of furniture (a lift up top and/or swing away sides) that the home theater can fit into so it will be more hidden.
OMG - what a challenge. Do you really believe anything will work or can? I think you have taken the term multi-purpose room to a new level and if that works for you, that's cool. However if you plan on having your new 'furniture' room I think you need to re-plan the use and decide on what stays and what goes. IMHO you have too many activity things there to make it truly work.
Given the windows and doors and stairs I see either an 'L shaped sectional out from the patio door and stairwell - or what could look really good would be a pit - 'u' shaped sectional to maximize your seating area. Either would be away from the stairwell wall to allow people to pass and not disturb those watching TV or playing games. A wall unit on the patio door wall would give you storage.