Vertical or horizontal? Light cream if you want to allow light in when closed. Do you have to have access - waklking through them?

Leather sofas can really dominate the room and can give an overall cold feeling. I would add some earthy elements, like a wood coffee table with glass or metal. Go to Restoration Hardware's website and look at their sofa room scenes. And I'm sorry I think the art is too harsh for the room. That's all your eye goes to in the room. too overpowering. I would look for something softer or maybe a cool mirror and I would add color to the room with pillows and some colorful lamps. I also think woven blinds would look great. They add warmth and give a finished look. The color of your window treatments should contrast your wall color a bit, not match it or else it starts to look generic and blah.. You have warm walls, warm floors and the woven blinds, like Hunter Douglas brand would pull it all together for you.

It looks like there are windows on the two walls adjacent to the fireplace, so I'll take your word for it that the TV can't go anywhere else. You make a focal wall by putting on it things you want to look at. I would clear the mantel, install built ins, get a lighter and bolder graphic rug, and pull the seating in closer. Before I did any of that, though, I'd see about improving the light. More lighting, or maybe just warmer color temperature bulbs.

I'd do option 2 myself. Technically I see an option 3- putting the couch out in the open, diving the two spaces. Couches don't need to be on a wall- you'd just need a smaller couch to do that and still have space to pass through to the other room.