I’d work with the wallpaper and have a relaxed coastal feel to the room. As you’ve said, remove bed add a sofa. Maybe a wicker sofa and a sisal rug. Next to the basin add a shelf unit to store all the kids stuff. Add a palm pot plant or two.

I was also thinking of flooring - adding a rug to help separate space

I’d soften the lighten either by changing the globe or using lamps.

Hi there.

I would consider a removable wallpaper to cover the beach theme.

Something soft and a little more welcoming would be so lovely for a therapy room. Check Etsy.com

Then you can create your interior from there. Anything light and natural would be a great choice for both adults and children. A large rug would be a great asset to cozy up the space too.

For a budget, check a local carpet place to see if they can overlock a carpet cut for you, it's a really great way to get a quality and decent sized rug.

How exciting for you! I would love to decorate a therapy room! Good luck :)