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we have a similar set up, but I would make one major change (at least from what I can see). Put the TV on the wall to the left of the little door/windows. Put the couch where the window is, with a table on either side? and the loveseat where the couch currently is. This will open the room rather than divide it and put less stuff on the long wall, that way you could put the desk in the living room but against the halfwall where you now have your loveseat - we have a similar arrangement but we use our loveseat to divide the room in 2 (I think ours is bigger). This will definately open up the space for you guys. is there some sort of a chair near the desk with a blanket on it? I think thats too much. try to keep furniture in a small apartment against walls. Also, not sure if you are covering the coffee table because its really nice and you don't want to scratch it (thats what DH did for 3 years before i came along and I sort of gave in). If its there for decoration (the runner) I'd get rid of it. with a small apartment, the "cleaner" the look the more open it will be. good luck!
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