I'm pretty sure this is a chalet style house. For example, it looks like the only windows in Bedroom 2 are rooflights shown on the floor plan as dotted rectangles.
It also looks like the Living Room and Bedroom 3 may be a later extension with a thicker external wall separating them from the rest of the house.
If this is a chalet style house then you won't have a lot of space to do much in the bedrooms upstairs under a sloping roof.
"Ideally we would like to add a principle bedroom and ensuite upstairs, a good size family bathroom and have the children in equal sized rooms."
You're not going to get all that upstairs in a chalet style house underneath sloping roofs.
How many bedrooms are you after?
Bearing in mind how much space you lose with sloping roofs I would suggest the cheapest way may be to use bed 1 and bed 5 as the two DCs rooms. (Bed 4 really does not look like a bedroom and seems to be much more a study as you said.)
Is the existing bathroom not big enough as a "family bathroom"?
I would suggest using Bed 5 as the principal bedroom and then constructing either a family bathroom or a bathroom to be used as your ensuite in what is now bed 2. You obviously won't be able to use the whole space as you will need to leave a passageway to bed 3, unless you use the whole of bed 2 as your ensuite rather than a family bathroom
ps Frankly, I don't really like chalet style homes and, if it were me, I would look to turn it into a proper two storey home.