Well, from a quick look, can you just swap around the kitchen with the lounge? Put the kitchen at the top end of the room - so sink just on the opposite side of the wall so plumbing and drainage should be fairly easy to sort. Do you have a gas hob/oven? Not quite sure how easy it is to get that moved. Then you can have a dining table by the doors overlooking the garden and possibly a small sofa too.
I would flip them round and have a family room at the back leading to garden. Then make the kitchen into a 'snug' with just a corner sofa and a tv/music system nothing else for adults. You could run the units all along one wall in the bigger room and still have room for a sofa in there. If you make it all open plan then put the washing machine where the ds loo is so that you can keep noise minimal.
I think the front room would be too small as a snug if you just swapped the rooms round (and gas, plumbing, waste may be difficult), so I think I'd take down the (assuming plasterboard, not weight baring) wall at the back of the kitchen, and put in a new wall where the living room widens out at the back of the stairs. Block the current kitchen door in, and twist the sink units to along that wall. Might make the entrance feel like a very long dark corridor tho. You'd need to think about that.
I have put small snugs in several jobs and very successful. Most 7 x 7 corner sofas take up little room esp with low wall mounted tv great cinema room at night Your idea sounds good too. Repositioning/removing serviv=ce pipes is very easy