I agree with the PP who advised spending some time to evaluate your needs and usage patterns before making any decisions. Based on the amount of shade on that upper area, you are not going to have a lot of luck with grass.
If that was my backyard, I would create a fire pit area (either gravel or pavers) and then surround it with shade-loving plants and under-story trees. Examples: Japanese maple, fern, mahonia, rhododendron, kalmia, camellia, hellebores, sweetbox. A lot of these plants are shrubs that aren't going to require much in the way of maintenance once established. For easy watering, you could run a soaker hose around the plantings and cover with mulch. Having some attractive plantings at this level would also give you a nice view out your windows. Keep in mind these are plants that would do well in my PNW garden. I would recommend going to a reputable local nursery (not a big box store) to pick out trees, shrubs and perennials that will work in your climate.
For the slope, I would choose a tough, easy-care groundcover. Vinca may be a good option in your area. Also look at liriope and pachysandra.
Adding organic matter is a sure method to improve your soil. I would simply clear the weeds, spread out all the leaves you gather this fall, and then toss some soil or compost on top to keep them from blowing around. Come spring, you will be able to dig or till in the composted leaves and plant.