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styrofoam covered with fabric wall art. My daughter and I did this for her room. We used cheap painter canvas and scrapbook paper. We sprayed adhesive glue to the canvas and layed the scrapbook paper on top.
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.