I would want a larger TV but thats basically what I want my living room to be like. One big sofa bed thing to make everyone comfy and laid back! to go cheaper you could use mattress and make or use bed pillows covered with same fabric as mattress.
Pillow room: don't spend money on couches or lounge chairs and buy a really nice movie screen. (This would be really fun for movie night, to just move all the living room furniture and bring out the pillows!