We've been through this drill so many times. Each time seemed better than the last, but none were quite right.
This time though, I think we've got it. Our 12'x13' room now has four distinct areas: a tiny entry area with a table to drop our keys & the mail, a sitting area just off to the left of the door, a play area tucked behind the easy chair, and a second play area next to the bookcase. Me likey.
Toy shelves behind the easy chair:
Comfy sitting area with nice light streaming in from the windows:
I love this arrangement. We have a nice line of sight through the arch and into the dining room & kitchen. It's a great spot for cozying up with a cup of coffee & the paper & watching Baby M play in her new, distinct play area: