I would make a wine bottle holder - not sure of the size of pictured objects but the blue one with with hole could be the base of it. I would do a web search for wine bottle holders and look at the images, lots of crazy/cool stuff out there. Or a hamster agility course (again depends on size) :) there are some really funny hamster/mouse agility videos out there.

I would go with a gold or yellow ... of course I happen to love teal/ turquoise and gold/ yellow together. Something in variations on the photos below... maybe some pink accents if you have a girl or lime green or blue accents if you have a boy.

Paint your house and ceiling first. You are probably asking for trouble if you put the floors down only to paint over the top of them. If you can, remove the tiles in the kitchen and paint just behind the line of the splashback too. Once painting is done replace kitchen benchtop then splashback. I would call the bathroom its own job and do it individually, unless you only need to paint the ceiling and if a tiler doesn't need to be brought in for anything else in the house? A lot of bathrooms now are getting tiled from floor to the ceiling if this is the case, paint the ceiling first, then tile. If walls need to be painted, it wouldn't really matter if you did them first or last, though if you did it first expect to do some touch-ups. I guess if you really wanted, you could do the first coat before tiles then second after... I don't exactly like stopping and starting painting, so I would do the walls (if they needed to be done) in one hit, after its been tiled. Well that's the order in which I would do everything... Really, for what you're asking, the painting could be done at anytime, but to make life easy on yourself, I would definitely recommend doing it before the floor.

These spaces can look awkward but yours is quite inviting with those windows. It could become a retreat space, that allows someone to be near the action without being in it. Seating or lounging would work with the very low head height. I could imagine it would be a great spot for a couple of cool beanbag seats, a small funky bookshelf and a sleek retro lamp, or if you have children to cater for a games setup with storage in a retro ottoman.