The question would be, is the ceiling height in this area going to be sufficient and if the answer is no, what would it take / cost to lower the floor so that it is even throughout the lower level? Taking off the dark ceiling lining boards even just in this section and painting the soffit white will go part of the way but without relevant consultants and their expertise, this is hard to estimate. But it is so worth the inquiry!
This plan would then free the upper level rear of the house in which to create a master suite; your bedroom where the kitchen currently is, a study / office overlooking the pool, a walk in robe in James’s existing room, and an ensuite beyond that alongside a bigger main bathroom for the children. It would have all the bedrooms except a guest bedroom, on the same floor, and most of the living space, bar the lovely library, below. Your existing bedroom would become one of the girls (or both until they longer want to share), the current spare room and the current dining room would accomodate the other two.
Plan B -
I understand if plan A is not where your heads are at - I mean I do, even if I don’t!!!! I’m here to help YOU with YOUR house but sometimes my enthusiasm can morph into something a little more taxing!! I do not want to overwhelm you with what you might assume were more expensive ideas than you’d already thought through and acted on (DA approved). But making the comparison could be a truly illuminating exercise.
You do not want to spend money fixing things you’ll later demolish, so that is why the conversation is important now.
Kitchen and Dining:
If we renovate on the basis of the existing floor plan, these are my recommendations:
Leaving the kitchen where it is would ideally involve replacing the joinery and getting rid of the dark bench tops, replacing the shiny floor tiles, giving a much more modern efficiency to the room and how it functions.
Potentially, we delete the breakfast bar (which looks like it has become a repository for the endless miscellania of a big family!!) and instead, install a bank of tall cupboards along the back wall and a more substantial island bench in the middle of the room, running lengthways. This would allow for a roomier breakfast bar and a really decent amount of bench space, with a ton of storage, too.