Thank you all for your replies! I'll try to answer the questions, and then I have a few Qs of my own.
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Just a thought - don't forget you will need to raise all the electrical receptacles, switches, etc. There are code requirements for heights, but even if not, you wouldn't want a switch down by your knees and the wall receptacles may end up at floor level. That's going to require a lot of drywall work.
Also, I hope there are no low AC grilles in the room - if so, you will have to raise those as well.
You will also (probably) end up with windows at unusual heights.
Curious why you need to raise the room - if the step(s) is/are the problem, it might be easier to just install ramps instead of steps....
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There are two outlets that have to be moved up. We've done that before so no problem. This house has hot water baseboard heat (can be a PITA, I know, but I have a severely asthmatic son, so the improved air quality that this kind of heat can provide was a major deciding factor for us in buying this particular house), and we'll have an expert come in and move the unit in the living room for us. That's not a project I'm prepared to handle, though I will be shadowing whoever we hire to do the job so I can get a feel for the system. The window isn't a problem; it was set to match the one in the family room on the other side of the front of the house, so it'll actually look more normal when we raise the floor. No AC grills; we're in the desert southwest, so just an evap cooler vent in the ceiling.
The steps aren't the problem. We just have a very large family. The dining room and living room are basically just one long room, cut in half and differentiated only by the steps down to the LR and a decorative beam across the ceiling (no worries; the inspector checked that for me yesterday and it is truly decorative, not load-bearing). We need lots of dining room and less living room and with the steps down, there's no way to put in the giant dining table that we need. Also, I just don't really like the way it looks. It seems old-fashioned to me. Plus, we have a number of elderly and/or disabled friends and family and we'd like them to be able to visit us comfortably.
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floor sunk by 14" that is a lot....how can that be possible... all the wood studs will be broken.. it must be me who don't understand this....
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Do you mean in the floor? Or the walls? Just that one section of the house is on a slab; the rest is on a crawl space. The steps are poured concrete, too, but they don't extend quite to the walls. So the wall studs are just longer in that one area. Is that right, or am I just making a massive display or my ignorance here?

I love doing home improvement projects, but this is by far the most ambitious thing I've ever done, so I could be completely clueless for all I know! And yes, 14" is a lot. My mom loves it, but I think it looks really weird, literally like a hole.
AtlanticWBConst. - I don't know how to thank you for taking the time to write me such a detailed post! I am so grateful; you really gave me the jumping off place that I need. Yes, I know that I need to take very careful measurements. I don't have them yet because we don't take possession of the house until the 21st of this month, and I can't measure accurately until I rip out the carpet and padding. Egad; all this makes me wish I could just back a cement truck into the house and fill in the stupid hole!
Anyway, thanks so much for the info. We'll have lots of projects to do in the next few months, both preparing the new house to live in, and preparing our old house to sell. I'll definitely be back here again!