Some people just know how to mix things up. I'd like to think I can, but I often see pictures that make me think how clever. Thats why I like magzines and the internet. Its so inspiring to see how creative people can get. In a small space you really have to be creative!
A daybed tucked in a corner? Outdoors somehow? Futon or pull out couch? My sister comes twice a year with her 2 kids. With only 3 bedrooms it makes it hard but we make due. Air mattress's help tons, great solution with small kids. How do YOU handle overnight guest? A nice room at the Holiday Inn?
I think sometimes the best way to make a small space larger is to keep it simple. Simple colors along with the things you need and the things that make you smile. Our minds are bombarded with information all day long. Its nice to come home to a calm peaceful house!