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 is actually a cool option for the stairways. The main stairway could have art this way up, as opposed to pictures.photo gallery up stairs, neat and organized. From the article Joanne Hudson’s Beach House in Philadelphia Magazine