Living room too small due to sunken garage stair well jutting into first floor layout. Image one shows the notch from garage (stairs illustrated but they are stairs). I want to "reclaim" this area and extend the living room down to include the little mudroom zone and the stairwell itself. Would really open it up. 

Note that the garage is 14 foot ceilings and recessed about 5.5 feet lower than main level and 2.5 feet descent into basement.

I see three imperfect options but maybe there are other better ones. Thoughts on these three or even something more elegant?

1) repurpose library as mudroom, at expense of losing the library but gaining a much bigger living room. Open stairs not a stairwell w ceiling. (second image) 

2) use basement as entry point into garage. Annoying for getting in and out but completely opens up main level except for a bit of headroom needed (maybe 3x3 square). Plenty of space in basement for a roomy mudroom area. (third image)

3) somehow adding (floating?) stairs to garage to avoid the stairwell but not sure how to do it without extending garage so that car doors have clearance if garage is used for 2 cars. Is this even feasible? Would still need mudroom area in main level but could use the former stairwell for that, allowing me to at least extend the living room into the former mudroom, even. If not all the way down to the library. (fourth image) 

Thank you! 

Help with floorplan ideas to free up living space