It will be interesting to see if someone comes up with a creative way to utilize them, I've never seen one and hate those steps (they look really dated), I'd fill it in with drywall so you have a full (no-steps) wall for a great mirror or art arrangement above the fireplace.

I think its best to fill it up and make a wall. a corner fireplace is a tough one.

Or you could custom make a book shelf up to the ceiling and have a stepped book shelf.

You can wall off to the top shelf, then find a really big and gorgeous vase to go there. I've seen some fantastic and colorful Turkish pottery that would look really nice there, especially with the yellow walls.

I would just display a couple large art pieces up there. But get rid of that strip of molding overthe fireplace surround before yo start worrying about the steps.

You could have a carpenter fit cabinetry in there. A sort of upside-down tansu design, to fit into the steps.

What about plants? Some tidy succulents in white ceramic rectangular trays would really bring some life into that spot. Most varieties won't mind the extra fireplace heat.

Build open wood shelves to occupy that space. Similar to this:

http://fruitimage.com/storage/ladder-shelves-wood-by-smart-furniture

If you don't want to store anything on the shelving above, an ironic thing to put on the shelving is stacked firewood as a design feature as shown.

http://roselandgreene.blogspot.com/2009/03/wood-love.html

I love the visual appeal of putting a built-in bookcase or firewood storage space above the fireplace, however, both of those ideas are extremely inpractical. If you keep a large store of firewood in your house it WILL bring bugs along for the ride, also-storing books directly over a heat source is a no-no.

Personally I'd close off the wall all the way to the ceiling and hang a cool mirror or metal wallart thing above it. Either that or just square it off so you have a clean flat surface and still let the space flow to the other room.

Personally, I would fill it up so that the wall ends flush with the fireplace.
I would also paint brass strip (on the fireplace) black, I would rip off the molding above the fireplace and I would paint the wall a different colour.

I, too, envision bookshelves. I'd use the steps as the base of the bookshelf and finish off some shelving all the way to the ceiling to give it more of a balanced look. Like this, but upside down: http://plansnow.com/dn3098.html

I would level it off with the top shelf and then do open shelving up to the ceiling. Either that or just drywall it in. The steps seem awkward.

Why waste space" better flatten those steps, so you have a big one, i would get rid of the midle one and have 2 shelves in drastically different heigts.... then up up a "floating" artwork there. or suspend a doucle mirror with cables.

Or set up many colored glass vases, because it gets lights from both sides it should look interisting .... and interesting option would be to fill up the space with colored glass, a sort of vitral

This is really a personal style thing... but I'm really into eclectic-vintage (like anthropologie) so I would probably paint the walls taupe instead of yellow and stack old edition books all over them giving it a disheveled library look... but to each their own.

Try googling images for a 3 sided gas fireplace, you will get lots of visuals there. I'm a light freak, so I'd keep the half wall but get rid of the steps. I'd try to make the fireplace look a sleek as possible by getting rid or changing out those gold and silver pieces in the fireplace. Lastly, I would surround the fireplace as proportionally as possible with a material of your choice with a matching mantle that does not overhang.

Sorry, it should read: " Then you can put up a floating piece of artwork, or a double mirror suspended with cables..."

In any case, i would rater fill up the section with a sort of paper biombo (3 free stand frames with a print on china or rice paper for example ) or glass, than with...wall

Definitely get rid of the white crown moulding above the top of the fireplace, paint out the brass so it's not so visible and flatten out the steps either at the first one, so that it doesn't block the view behind the fireplace or at the top step so that there's more of a visual weight over the fireplace.

Depending on the era of your house and what style you've decorated in, you could add open shelving like others have suggested. I think the open shelving would be better if you cut it back to the first step. If you were to choose the top step it would feel to cramped.

Here's a bad example of what I'm thinking of

https://lh5.googleusercontent.com/-2v7AehXyu1Q/TYBnnHHMXcI/AAAAAAAAADs/_h2lD2iHzX8/s1600/055.JPG

or you could do something a bit more decorative (as kind of an art piece)

http://www.ideashomedesign.net/wp-content/uploads/2012/02/Modern-room-divider-design.jpg

Plus I would paint... That colour of yellow is a little too hospital for me...

@Jess13, since the firewood won't be used for burning, paint each log a different color from a multi-colored palette to keep the bugs aways. This also creates an ever changing art piece over the fireplace.

Something like this:
http://www.artatheart.co.uk/artatheart/2010/04/hand-painted-logs.html

I would leave them bare.

But yeah, that crown molding is not doing anyone any favors.

Is it just a flimsy construction with nothing inside? Perhaps you could get rid of the steps altogether and make a more solid single level wood or whatever mantel over the top. I agree that moulding must go. If there's a reason for the setup it may be possible to cap it evenly with some rustic wood or whatever you prefer and build out a simple mantel that extends down towards the fireplace from the top level.

Where is the venting? Is it in the step-wall and then up through the ceiling & roof? Otherwise I don't see how it's a usable fireplace. And if it's not usable, perhaps you'd just want to take it -- and the steps -- down.

Am I the only one who kind of likes them bare? They're an interesting architectural element. Leave 'em alone.

But yeah, nix the crown molding so it's not broke up like it is.

Obviously the answer is chevrons. J/K.

The crown molding is a bit yucky in my opinion, but I think the stepped shelves are an interesting architectural element. I'd say maybe use them to display some large-ish art pieces or put some potted plants on there.

A custom-made, midcentury-style screen of vertical wooden slats, with a base following the lines of the steps, might make a useful room divider.

You said, "We don't want to just display little tchotckes there", but I think another possibility might be to display BIG tchotckes there. Large matching bowls or plates. A trio of potted orchids. Or alternately one HUGE thing: I could easily see a vintage pedal car sitting up there.

Finally, if all else fails, you could find some big, glossy art books and place one on each shelf.

How much can you spend... ? I would install a made to measure fishtank which would fill the whole space and have lots of colourful fish in there..

Kinda like this...

http://cdn.home-designing.com/wp-content/uploads/2008/09/under-stair-aquarium.jpg

Thanks for all the suggestions! The steps seem very solid, so I don't think they can be removed, so building up seems to be the only option. I hate the moulding too, but it also seems like it can't be removed. So I was thinking of painting the wall and the moulding the same neutral color so it doesn't stand out so much. I'll also paint the brass black.

I found this image of what it could look like if you built up the steps:
http://evergreenfireplaces.com/images/Montigo%20HL%20Peninsula.jpg

Oh wow, that looks SO much better. Thanks Amberm.

I would put plants on them if you don't fill it in.

What style is your home? Here's a desert modern take on a stepped fireplace.

www.flickr.com/photos/sesshudesign/3845770427/in/set-72157621988243725