I can't seem to figure out how to get a great picture of a tongue and groove living room that also has ceiling molding, off of one of my houzz ideabooks to show you that this style you like, can and does look good together. I picked the collaborate feature and put your user name in it to try and share this pic.

You have several choices at different price points. 1- Sheet rock, plaster and paint This is the most expensive option and will add the most permanent value to your home. 2-Wallpaper over a heavy liner paper. 3-Prime then paint the wood, it will give you a stripe effect. Let me know what you decide to do. Linda

I'm a first time poster and have managed to post twice by mistake!

It sounds lovely. The ceiling will be more than suitable for a transitional style. I think the wainscoting would also be fine but as I'm cautious I'd be adding after I'd lived there for a while. It does seem more traditional than transitional. On the other side I'd love the bead boarding in the hall.