I think they mean 5 rooms, not 5 bedrooms.....one master bedroom and 2 bedrooms for children with twin beds or bunk beds in each. I lived in a 1,300 sq ft house for 2 yrs with my husband and 2 sons. My suggestion would be to have an open floor plan for the kitchen, dining area and family room in one large room. Add a bar in the kitchen for casual dining. Be sure to include storage in family room for toys, games, etc. Add a built in desk in eiher the kitchen or family room areas . The master bedroom and bath should be large enough to accomodate a queen size bed and if possible a sitting area (maybe a bay window large enough for for a small loveseat or a couple of comfortable chairs). I would recommend a large walkin shower but no tub for the master bath. Instead have a nice size tub/ shower combo in the hall bath. Too make your house feel larger, use neutral camel, beige, gold or grey paint and carpet through out the kitchen, dining area, family, hallways and hallbath. If you want to add color, limit it to 3 bedrooms. Hanging all your window treatments at ceiling height will make your rooms feel larger and taller.

@soberg: on the toilet entry we thought we could have a 2 way access to the corner most toilet - one from the closet side and another from bedroom 3. @ eagledzines. Thank you for the sketches! On the high ceiling do you think we could juggle the entire layout of 1st floor a bit to accomodate a small family room (hall) where the staircase opens along with 2 other bedrooms. We are ok to compromise on the room sizes a bit and toilet / closet positions can be changed too as long as pillars are not affected.. The kitchen changes sound good. I was also wondering if it would be ok to have the sink right below the window. Thereby freeing up more cooking or prep space.

There is a specialty lighting store near me that I am going to soon with photos to work on lighting at my house. I will show them your photo and see if they have an idea. Probably won't be till Fri or Sat but will get back to you.

@BeverlyFLADeziner: No, I'm not assuming the back has a finish. If you are referring to the cable being visible, or the approach to route it under the sofa would not work, there are two options: Align the table so that the "backless" back is up against the side of the sofa. So, flip it 90deg compared to the image of a sample sofa and this table posted earlier. The cable can be stuck along the curved edge of the table on the back, so that it is not visible. This way, it gets down to the floor along a surface that people cannot see as opposed to dangling through the hollow portion of the table.