We made our play area into a dining room, and we did this for two reasons: 1) The kids never really played in that area, 2) It was REALLY cluttered and busy.
Soon, we will be getting an antique dining room table and buffet from my cousin that has been in the family. It will look really nice in this new space :).
Here's our new dining room:
We put the shelf into our bedroom, and took out the desk, and other small annoying pieces of furniture. Here it is: