I would consider something light with some other colors to mix in like this. http://t.homedepot.com/p/Silestone-2-in-Quartz-Countertop-Sample-in-Mont-Blanc-SS-Q0220/203674451/ I like the wood paneling and would paint it a white with a warm feel to it. A white will reflect a lot of light from your large window. I wouldn't paint the window casing as it might tie in better with the rest of the house. Good luck!!

Wow, that was awesome Mark, thanks for that and everyone else. I thought about the desk facing the other way actually, to avoid feeling enclosed I do have really great views there so I thought about a small couch and maybe a bookshelf on the back, but having the dining table in front is probably not the best either.... complicated :( Here are a couple more pics, today was a beautiful day so I managed to get more of the views

How about butcher block instead? IKEA and the big box stores sell it for countertops, the price is decent, and you won't have as many issues with buckling, water damage, or what to do with the edge as you would with the ply. If the edges of the ply get wet, or if any seam around a sink gets wet, the plywood will "blow" and you will have to replace it all, anyway.

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).