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.
* IKEA hacks: Lay an Ikea kitchen cabinet frame on its side and add a wooden plank for a low bench/media console. You can get the wood planks cut to size in your local hardware store and easily paint them.