I had a similar set up in my family room....
The wall the woodburning stove was on was covered in brick with a brick hearth. The brick went up from the floor about 6 ft. Above that was some fugly paneling. I have video of it on my phone but no digital pictures to share. Oh and to top it all off, I had an acoustic tile (
not a drop ceiling) ceiling. This room just screamed 1979.
I had the ceiling tiles, paneling, brick & woodburning stove removed. Some drywall was removed as it was damaged in the effort. In it's place I had new drywall put in, canned lighting and a gas burning fireplace insert. I didn't put in a hearth as it just took up valuable space in the room. The only issue I had was trying to figure out how to trim the fireplace insert. Since I didn't put tile/stone or brick back up on the wall, there was a gap between the edge of drywall where it meets the fireplace insert frame. I talked with the fireplace company and found that some simple trim would be fine.
Here's a link to an earlier post with a few pictures.
It's been 2 years since the room was completed and I love it. It so nice to just push a switch to turn on the fireplace. No messy wood, no smoke. I do miss the crackling burning wood sound but that's about it. The insert keeps my basement family room nice & toasty. I have to shut it off if I'm down there for more than 4 hours.
In the whole remodel process I think I learned a lot. I hired skilled nephews to do the work since that's not my thing. I saved alot of money but it took a lot longer because I had to work around their schedules. But all that time hanging out with them was fun too.