I wouldn't drywall over the window. Take a look at the options for recycled brick, they may match better than you think.

We have that exact sink! And a very small powder room stuck in the 80s. Only difference is our door is on a side wall, and there is no window. We're no where near finished, but just ripping down the pink floral and stripey wall paper has made a huge difference (including revealing the toilet is in fact white, not pale pink). We're going to replace the rather unappealing plastic sink with a tiny ceramic one with new taps, and the old plastic cistern with a new colonial style ceramic one, and new seat (keeping the toilet base as it is in good condition, and classic style). Then new paint, and a good clean and regrout to the floor, new light shade, toilet roll holder, storage in one corner and art.

Hi Cathrine, just a little sketch here for your tricky little bathroom. I was trying to get a bigger bath in, hide the toilet behind the door and have a vanity with lots of storage. What do you think? Let me know if you want to explode this any further. Thanks Gunnar

Depending on latches and fixing area, etc - you could get a good glazier with a bit of finesse to custom make a mirror to fit into the window area, and then just centre the vanity below the window. Provided the window glass is obscure, it will still look like a window from the outside, but you'll have an interesting recessed mirror in your bathroom! (hope that makes sense) But, If you want a seperate shower then it looks like you'll have to alter a lot of plumbing anyway, so you might as well move the vanity while you're at it.