My thoughts:
1. Either get rid of coffee tables and end tables, or find some baskets that fit under them to use them for storage. You have too small a place to have ANY furniture that does not serve as storage. Including your couch or loveseat - I can't tell from the picture, can you put stuff under them? I can get stuff under my couch. Or move it a tiny bit away from the wall and store a couple underbed-sized rubbermaid totes behind it (up on their skinny sides).
2. Get rid of either couch or loveseat. I'd suggest keeping the loveseat, but I'm short. If you or hubby like to stretch out on the couch, and the loveseat's too short, I think the couch would be workable. Both is too much for that room.
3. Would you consider eating at the coffee table? I've totally done that in small apartments. Just do away with that table and chairs.
4. If you don't like 3, than you need to combine desk with the kitchen table, in the living room. Meaning, put all your electronics in a box under the table or under the table and use a tablecloth to hide what's under there. Keep your laptop on top of the table when you're working. Keep your other work supplies in a roll away cart under the table and keep your files in a rollaway file under the table. You can often even find these at a thrift store or on freecycle. Yep, I like the idea of putting files, supplies, and electronics under the table and covering it all with a pretty, floor-length tablecloth.
Regardless of whether you choose #3 or #4, you need to get that table out of your kitchen. And it will help to get a desk out of your bedroom, as well.
5. You need more closed storage. When you use open shelving, things look too cluttered. Clutter collects in a small space anyway, and if you add the fact that there's too much visual busy-ness because of all the tiny stuff shoved in corners and all over shelves, you'll go crazy trying to keep your place neat. I have had more trouble keeping apartments neat than houses that are larger. So don't work against yourself. Start by finding lots of sleek baskets or bins for the shelving, so that everything that's teeny-tiny and busy is hidden. Don't let anything show on your shelves unless they're book spines (shelve some up and down and some sideways for interest) or pictures (intersperse them with the books or display them in front of books if the books aren't the prettiest in some spots). Everything else should be in a basket or bin to eliminate visual clutter and make your place feel calm and peaceful.
6. When you get your desk out of the bedroom, can the exercise equipment go in there? Could you listen to a book on tape on your ipod instead of watching TV while exercising? Because it would work out much better, visually, to get it out of your only living area, you know?
7. Where the armchair is - get rid of the end table and the CD rack - wasted space. You can store tons of CDs in a binder and put them right on your bookshelves. Get rid of the jewelcases - they take too much space to store them in a place as small as yours.
8. Layout: If it were me, I'd keep the TV and the two bookshelves where they are, and make it the focal point. I'd probably then keep the loveseat, but move it forward closer to the TV. The coffee table would be gone and I'd have a smaller storage ottoman or steamer trunk in its place. It goes 13 inches from the edge of the loveseat. Then enough room on the other side to walk between the ottoman and the TV and that's it. I'd then have a nice little grouping - TV, loveseat opposite, and chair to the side. Your traffic pattern would then go behind the love seat. I'd get rid of the couch and put the kitchen table against the windows. I'd put chairs on three sides of it - and the fourth chair at his desk in the bedroom. I'd hide all the stuff under the kitchen table like I said, tablecloth it, and then you can work at the "desk" looking out the windows, and get all that good natural light for working, and then eat at the table for meals. Plus, it's really close to the kitchen, so convenient.
9. Dishes: I'd get narrow wall shelves and install them where your yellow leafy-looking wall hanging is now (which would be next to the table) and I'd store pretty dishes on them. Some that go with your decor - but only about 4 plates, 4 bowls, six-ish mugs, four glasses, a crock with silverware, a basket with napkins. I personally have some floating shelves hanging on my dining room wall that would be divine for that purpose.
10. Hang your guitar from the wall like Sarah's husband does. Either over the TV or behind/beside the plaid chair.
11. Kitchen: I love the idea of magnetic spice containers for you. They're not going to be very convenient for cooking where you've got them now and they're taking up valuable shelf space.
Once your table is out of there, all that space can be food prep and storage. We have a tiny kitchen, so we converted our breakfast nook into food prep/storage. You can do something similar here. We went to Lowe's and got inexpensive stock cabinets, and my husband installed then along one wall. We didn't have enough space for regular under-counter cabinets, so he got the kind that are supposed to hang on the wall. But he installed them like floor cabinets, on a kickboard. Really easy to do, even in an apartment. Then, we got a sheet of MDF cut to size for the top. We still haven't topped the MDF (two years later) but we will with a piece of countertop or we will tile/mosaic it. So it's like a little counter with cabinets - not as deep as full-size but it fits the space and gives us storage. You could do something similar with some cast-off cabinets.
If you're going to use that open shelving in the kitchen you need to eliminate the visual clutter. Anything visually cluttered must go behind doors or behind a curtain. Anything left out should be food in canisters (even stuff you wouldn't normally put in canisters - if you can get rid of the packaging and store it in canisters, it can go there) and baskets or bins full of things.
Why don't you put your kitchenaid on top of the dishwasher, if you bake a lot? Then the dishwasher is like extra counter/food prep space, and you don't have to lift the thing up and down all the time (mine's HEAVY and I wouldn't want it stored up over my head like that).
Foil, saran wrap, plastic baggies can all live in a rack on the inside of a closet door. Probably the linen closet is closest to the kitchen, yes? Or that storage closet which will be on the other side of your kitchen table in the living room, if you choose to follow my advice
If you're going to keep your electrical appliances on open shelving, consider slip-covering the shelving unit with a tailored curtain to cut the visual clutter.
12. Bedroom: Your desk chairs are huge! Get smaller ones, and get rid of the big ones. They'd be fine in a larger house, but they're just overwhelming your bedroom. Alternatively, you could move one of your kitchen chairs into the bedroom at his desk (and of course if you're getting rid of your desk and sitting at the kitchen table, which I see as totally doable with the amount of stuff at your desk currently, all of which could be hidden away, you'll be in a kitchen chair too).
Take measurements of that bookshelf in your bedroom, and go on a quest to find baskets or sleek bins that will fit those shelves. That is not the type of stuff to go on open shelving - it needs to be hidden from view.
Your suitcase will fit in your closet, once all your chairs are out!
I wish I could come help you - it seems like it would be such a fun project. You've already made it so cute, and I can see how hard you've worked on your space already. Nicely done. I think you just need to take those final steps of getting rid of some furniture and being ruthless about not getting anything furniture-wise unless it doubles as storage.
:. I hate to break up a matching set and they are a neutral color. I would get rid of the armchair, and some of the smaller pieces. Go for fewer pieces then rearrange things. This way you and your husband would each have a place to stretch out and settle in for a movie or while reading. In the current issue of Cottage Living magazine, there is an article about a Katrina Cottage that is great. A lot of good ideas for a small space. One thing I liked was having the dining table pushed longways against the sofa with a chair on each end and a bench on the long side, which you could tuck underneath (not sure if I'm explaining this well). Basically, I would try to use your living room as a dining room as well. This would give you more room in the kitchen which is important if you are trying to prepare most of your meals instead of eating out.
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