Thanks for offering such an awesome project to work on! I had a blast finding the proper colors, textures and placements for your new family room.
I wanted to keep the character of your craftsman style home with the windows, nooks and fireplace details. Really beautiful. So with keeping the walls white (less work for you!) I decided to bring color into the room through the furniture. I have attached my layout with labels, so you can see what each piece is and how it is used in the room. I will give a brief highlight on some of the great features and my attachment should explain the rest. I noted that you wanted to have a nice modern feel to the room. So I have used couches with clean lines but also have smooth edges, that are kid friendly.
The coffee table has a concave part for storage of all media/remotes in an easy to reach spot.
Top left in one of the nooks is a kids table and chairs, perfect for your kids to use.
Bottom right is a wall shelf, that has stacked shelves for a nice visual and storage piece.
Got your rug in there to tie the room together as well!
Addressing your baby grand, I was unable to include that in the room and keep enough space and flow. I apologize, as this was one of my struggles and I hope you are able to find a great spot for it in your home.
Its been a pleasure and please dont hesitate to let me know if you have any questions about my design, I am happy to help! I look forward to when you make a choice.