This is a nice-looking living room with smaller rug. Perhaps the key is to frame the rug with sofas / sofa and armchair combo / sofa and the window. And another trick is to fill up the room so the size doesn't look awkward.
this would actually be a really fun idea to bring light into the space. a ladder could go against the wall where the metal desk is now with string lights. it would be nice to see walking into the room from the hallway