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TreeHugger has shown many ways to hide the bed; most are designed to gain more space. But the Red Nest by Paul Coudamay doesn't; the bed is still there taking up space, but is hidden by the sliding bookcase.
Michael's Room cutting into the knee wall would offer more floor space, plus a very cozy sleeping nook. We would do just one bed, but it could be slightly enclosed, so there's a window at the head of the 'bed'.