First of all, I think if you wish to have an option to open up the small room occasionally for large gathering, I will suggest you consider hacking partially upper part of the wall between the living and the small room. As the solid wall has block the visual connection between the 2 areas.

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Then do a new sliding or fix glass window above 1 meter, this will help to indirectly merge the 2 areas into one so people on both sides can see other others.

As for folding door you can opt for 2 folding glass doors on each sides as shown below:

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