How would you decorate this area?

I would fill the space with the cabinet. What you don't use for TV equipment you can use to organize the kids things. Once the TV is on the wall you can add your art around the screen to work it into a gallery wall. Since a mounted TV can become a black hole, I would add dark things into your gallery wall, your Richmond Hill sign is a good start. Vary the shapes and sizes on you wall to keep it interesting. You could also paint the wall a different shade of your room color to make it pop a little. If you like the look of shiplap this is a good place to put it because it wouldn't dominate the space.

I think V Smith is spot on.

Here's a load of ideas: https://www.bing.com/images/search?q=Decorating%20a%20TV%20wall&id=A66C779B37E74D2F4521D85D7B770A7A16EDA475&FORM=IQFRBA

I would agree with what others say to do. I would build or buy a bigger unit but one that could incorporate the TV. So shelves that go up and surround the TV.

If you can't have that because of the fact you have a awkward corner alcove then you need to have your unit at least twice the width you have now. I would go higher also, otherwise there will be to much of a gap between the unit and where you fix the TV. I would also think about the pictures you would put around the TV. You don't want something too big. I think framing with smaller photo frames will be better. These can be photos of family mixed with small art pieces.

A colour on the back of the wall would give it more impact also.

I love painting the wall behind the TV a dark color so that it doesn't stand out as much. Then surround the tv with art to make a gallery wall. This makes the tv feel like a purposeful design choice.

I also think that a wall unit with storage or shelving for displays would be great for the area.

I agree with the suggestion of a wider television stand but keep it low and with shelves for components or storage. If you are mounting the television to the wall consider using re-purposed wood slat adhesive wall covering in various colors to give the rustic farmhouse feeling that you are looking for. You could also incorporate rustic wood shelves mixed in random spots on the wall and hang pictures and artwork to take away the focus from the television.

Pic of shelving idea is below.

The wall covering is available at most home stores and on line, moderately priced, self installation, and easy removal without damage to your walls. You could even just do a portion of the wall to save money.

Good luck and would love to see what you end up doing.