What a fun space! Love the pillows...I agree with above, lower all the frames, but not so low little ones can reach. The art should fall at eye level about 5'4" for walls and for behind the sofa not more than 12" above it. Then keep the width about 5" inside the sofa length on each side. Your frames are small so you need the close together for impact. I would start with some pretty curtains for the door and large window and then a simple Roman shade for the small window- since your girls play there you don't want anything they will grab hold of. http://www.houzz.com/ideabooks/query/how-to-hang-a-photo-gallery

I would suggest you take out the cabinet that is to the right of the stove and use it elsewhere in the house -- perhaps in the bathroom or dining room with a hutch above it. Then, I would suggest you have someone install a lazy susan cabinet in the corner between the sink counter and the stove, meaning you would move the stove down a bit and have a small cabinet/counter top to the right of the stove. I would suggest you have the cabinets refinished in white and then paint the walls a pastel you like. If you would prefer white walls, then add white-painted crown molding and paint the ceiling a light neutral blue, such as Sherwin Williams Niagara Falls Blue. Then, I would suggest you choose a favorite accent color and use this sparingly in accessories like towels, pot holders, small vases or floral arrangements, and a valence above the triple windows. For a genuine 1940s look, you might have white ceramic square tiles with a rectangular red border installed as a back splash behind and above the stove. If you are replacing counter tops, I would suggest a light color such as white with a beige or light grey vein or striation for some sort of pattern. You might be able to find the same color and design in floor tile OR opt for a wood floor as another poster suggested.

I have just taken a couple more pictures (excuse the untidy house) from the stairs. As you can see it's an open plan area that isn't that big but very high ceilings also in wood (Macrocarpa) with dark wooden beams. The house is surrounded by bush so quite a dark house. I initially considered a darker wood similar to the beams but not sure if that will make the house appear smaller / darker...I'm really not sure what to do!?!?!? Thanks

Thanks for your comments - The room is approx. 5m square - so not huge. The tiles being too busy for it is a concern I have too. It's very light and sunny - two of the walls are glass and slide back to the outside, one wall is French doors which lead inside the house and the other wall has windows looking into the house. The roof is louvre. Can't put up a picture as it's still being built! I'm still lusting after these tiles though...