Q: "What the heck is my sister supposed to do with this? Such an odd long wall section above the FP. That empty square on the right would drive me nuts! Thank you!"
A: Great simple canvas to work from in this room (neutral walls, medium tone wood flooring, white baseboard and window casing) The shallow niche to the right of the fireplace is intended to be for the tv thus the wall and cable outlet located there. Builders will include this for the prospective buyer to wall mount their tv in this location as this will often save space within a room eliminating the need for a tv stand/media unit.
You have some options for the built out drywall above the fireplace. You could include some artwork (I would center a large piece above the fireplace or above the tv. I don’t think you require multiple pieces mounted.
Additionally you could add some wall shelves for accessories.
You could clad the built out drywall above the fireplace with a different material as well (a nice wood veneer that would coordinate with the wood flooring, an accent paint color or alternatively a marble or porcelain tile)
You could also build out the area around the firebox and make it flush with the drywall above and below and tile the entire build out. Please see some examples I have included.