I'd say that someone has bodged the chimney at some stage, as no builder would have built it like that from the start.
How deep is the chimney opening, and what sort and size of burner are you intending to install. They can sit out into the room, so you only need to rebuild the opening and the throat. Have you had a look up the throat yet, or done a smoke test.
It looks as though you've got a good hearth, so that'll just need tiling, so you only need to decide on what sort of opening you want to achieve. How good are you bricklaying skills - and will you strip the whole chimney back to brick and build an arch, or rebuild it, and then plaster over the mess.
You'd need to cut a mortar line a few feet above the highest point you want the lintel to go, and then set up a strong boy acrow to make sure it's all stable, then take out the crap and loose bricks, and then rebuild the chimney breast to the style you want.
