I can't really tell how big that boxed area is, but perhaps a gas or electric fireplace with built-ins on either side of it would look nice there. Then you can put the TV on top and have a large space to arrange your furniture. If you don't end up making it a multi-purpose room, try arranging the furniture in the middle, so it's not all up against the walls. It will make it much more intimate and cozy (as long as you have the space).
Good luck.