This is the perfect place to put a pull out bed! I always look at those beds and thing they're impractical because it's too hard to leave all of the open floorspace needed for one but I'd happily do it for this library/reading space.
I love the little semi-oval space the rail creates, bookcases, lighting, seating, rug and wood floor. A little library has been created out of "dead" space. This is just too good for words (Southern Living Idea House, Charleston).