Two lights are better, but if you use thee pendants, then position the two stools should be in the middle of the center and end lights.Although they will look very huge. Pictures would help.

I never love open shelving in a modern kitchen they are dust and grease traps but I would hang horizontal glass front cabinets and paint that wall some awesome color ,run your backsplash up to bottom of window all across. If you have space make the island top larger and paint out the other wall of cabinets to match main ones. The island top could be something much different than the others

congrats! first, sand prime and paint out those cabinets....i'd go with a grayish shade of white or pale gray that will work with the flooring. i'd also carefuly chip off the yellow tiles. since on a budget, consider applying some beadboard as your backsplash, painted in a glossy, oil based or marine paint in a crisp white to keep it scrubbable, then, dress up the edges with some small mouldings, painted in the same white paint. this is going to be SO MUCH less costly than tile! and it will look great with the butcher block countertop. you can probably refresh the butcher block with a light sand and oiling. you could even get an additional piece of butcher block (ikea) and create a step-up 'bar' for some stools on the peninsula for some casual seating. then get a pair of pendant lights to hang from the pot lights above (they make lights that insert directly into the pot light...no hardwire necessary).

You could use a solar shade. They're easy to wipe down, and if you choose the right openness, you'll have your privacy, too. http://www.selectblinds.com/solarshades/extreme-roller-shades.html http://www.selectblinds.com/solarshades/designer-roller-shades.html Good luck!