Hello and welcome to the forum,
You can try the sub above the TV in that alcove, but it is likely to sound kind of boomy in a partially enclosed space like that, so you may be better off with another placement, although the log holder looks pretty close to the fireplace and heat + electronics is not the best combo. I'm thinking to the side of the back couch underneath the stairs might be a good spot.
As for the surrounds I think mounting to the back wall, in the position of your old surrounds is going to be your best option. Their ideal height is 5-7 feet so placing it on a stand on the step probably won't get it high enough. Not only that but with your couch pushed up against the back wall, when the DBs are directly to your sides there won't be much room between the speaker and the back wall, and ideally you want 3-4 feet between the back wall and the driver that is facing it. Otherwise the sound bounces between the speaker and the wall which can also sound muddy. If you do go with the back wall placement you may find that the speakers perform better in the bipole mode.
I hope that helps out, but please let me know if you have any other questions, thanks!
Jason Hicks
Aperion Audio Guru