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you know, I kinda like the rock fireplace but I am a rustic look kinda girl though. If it were me, I would just add a huge piece of driftwood (or similar) for a mantle.
But if you want something a bit more modern, stacked stone looks really nice. What is the general feel of your couches? That makes a huge difference.
In wall fireplaces are very contemporary. I would knock off the ledge and cover the wall with slate tiles, sheet metal or brushed aluminum
I always gravitate towards shapes like this for fireplaces:

@panterapeach: yeah part of me sort of likes the retro 60s look for the kitch of it. But I just don't think I can live with it everyday. I'm definitely not a rustic girl.
We have this couch right now. There is a chair and ottoman that goes with it as well. But we're hoping to get new couches in the near future so I wouldn't necessarily base everything off of this.

Depending on how much work/money you are putting into it there are lots of options. The easiest and cheapest would be to mount a mantle. Depending on the style it could really change the look of the fireplace.
http://pinterest.com/jwcasa/casa-heart-h/
My fireplace pinterest board for our new home. :)
I would love to recreate this look at our new home but I don't think it will be possible.

@linguo42: I love this!!! But if you're on a budget, I would just paint the rock part something that contrasts your wall color, and position your furniture around that corner, and make it your focal point and put the TV on the other wall in that same corner so neither is ever blocked and they can both be enjoyed...plus painting it will be a quick fix until you figure out what it is that you want...if money is of no concern, I would turn it into a corner fireplace, like one of the first two on this page;http://arhdecoration.com/corner-fireplace-design-ideas/
Good luck!
@Meowkers: I have a very similar fireplace, even the raised base (just no ledge) and unfortunately for our its not that simple to just rip out and start fresh..... but one thing my grandmother did with hers that I want to do with ours is she painted it a whiteish gray and it looks so much better! She has something mounted on it (like carved driftwood or somthing) and it looks great. I will probably paint our then put a mantle we purchased up. But consider yourself lucky because in three spots on our the rocks just out further like they are supposed to be little spots to put things on (like pictures or something), it looks ridiculous.
Good luck with your house.
I am going the same thing... to be honest I am bringing in some fireplace reno companies to give me some ideas and quotes :)
I am with @julies1949: , I love the slate! Brushed stainless steal would also be beautiful, but I really love the slate. If you do a slate, make sure that they add (before installation) a "hanging" hole. It is a metal hole insert that they can add to it to make hanging art or wreaths easy.
Candace Olsen does a lot of very clean, modern looking fireplaces:


Changing the stone to something more updated, would still leave a little rustic feel, but would allow for more contemporary decor. Obviously this is larger than your wall, but this is the feel I am talking about.

I would get a traditional fireplace and maybe have a slate hearth laid down in front of it. Nothing too big, just interesting.
I would suggest giving it a classic surround (like @linguo42 suggested), and adding some "built-in" bookshelves/displays around it on both sides to soften the fact that the fireplace is so off-center in the room. Built-ins will also help give it a bigger presence in the room after you get rid of all that bulky stone.



You could have the shelves stretch all across that far wall (the one without windows or doors), put your TV/media center in there, and that way the couches could face both the fireplace and the TV, while leaving a clear path to those outside doors. I think the previous owners got the setup all backwards!
Ladies thank you for the many suggestions. All the super sleek and modern fireplaces you guys posted are so cool but unfortunately not our style. Gorgeous to look at though.
@MrsStormy: I would love to see pictures of your or your grandmother's fireplace if you have them. What was the complication with taking out the facade of yours and starting over?
@CanadianMermaid: keep me posted on any good ideas!
@Minutiae: I love your suggestions and have been toying with the idea of built ins myself. I'm just not sure there will be any room on either side of the fireplace for that. they would have to be super narrow. It's so odd how assymetrical it is. I agree, the current owners set the room up totally wrong. I plan on putting the tv on the big wall perpendicular to the fireplace.
Keep the suggestions coming ladies!
This project actually took off drywall to feature the stone fireplace but maybe the end result is something you could adapt. http://www.google.de/imgres?imgurl=http://www.countryliving.com/cm/countryliving/images/stone-fireplace-1108-de-7024969.jpg&imgrefurl=http://www.countryliving.com/homes/makeovers/fireplace-makeover-1108&h=460&w=360&sz=42&tbnid=eIsXVkttz3nqyM:&tbnh=95&tbnw=74&prev=/search%3Fq%3Dpainted%2Bstone%2Bfireplace%26tbm%3Disch%26tbo%3Du&zoom=1&q=painted+stone+fireplace&hl=de&usg=__6NcQ3DZ0yR6-5ncSDx5us6GoLPw=&sa=X&ei=WETzTo3eBYef-wau66DUAQ&ved=0CDoQ9QEwAg&dur=1141 The wooden mantel framing the fireplace makes a significant difference to the look and is vintage yet still contemporary.
I wonder if you would not set the room up so there are 2 sitting areas, one focused aroudn the TV including the sofa and a more comfortable nook near the fireplace. Either a table and slipper chairs for dining or a reading nook with a big cozy chair and soft rug.
What about doing a dark brown room and leaving the fireplace as is? I like it! I think if you darken the room, it will blend in but still be an accent. I think if you stick to lighter furniture, such as the couch you showed us, with a darker room/that fireplace/wood floors, it could be very striking.
I love the fireplace! I think adding a mantle would make a huge difference, and really complete the look of it.
@slicey19: wow that project turned out GORGEOUS! The mantle makes such a huge difference. Thanks for posting that.
@Meowkers: Well, I don't know if your is faux rock or not, but ours is real (local) rock, so that adds to the complication, taking it out alone is a huge project. We also don't know what is behind it, we think there is brick behind it, since the back of the fileplace is on the back of our house and that is brick.... Some people say you can dry wall over it but from what I have read thats really not a good solution. Basically we had someone come look at it and they said that it was unlikely that it would be able to be done without a contractor, and its not that big of a deal to us right now, but maybe someday. I will try and find pictures for you 
@slicey19: That is gorgeous and that is exactly what I think I should do with mine! Thanks for posting!
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Ladies, your suggestions on my previous post about improving the exterior of our new house were amazingly helpful so I come to you again for suggestions about the interior.
This is the family room/living room of the house, (there isn't a formal living room so this will be our entertaining and living space).
That wall of rock on the fireplace will come down as soon as we get the keys. But after that I have no idea what to do with the fireplace, how to remodel it and how to deal with the fact that the firebox is actually elevated off the ground, (there's a ledge there).
I'm open to any ideas you ladies have about how to remodel the fireplace area. My style is sort of transitional, (updated classic). I like classic, and airy looks with some more contemporary and glam pieces mixed in. I want the space to be comfortable for everyday hanging out but also nice enough for entertaining.
Also, that picture is taken with the current occupant's furniture/accessories. All of that will be going and the room will be getting painted. Floor is wood.
Any other suggestions on what to do with this living/family room are very much welcome!
Thanks in advance ladies!