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.

There is nothing worse than ceiling-mounted lights--harsh shadows, flat lighting. They are strictly for utility. I would put a large-ish, shallow cylindrical shade on them and put nothing more than a 15-watt bulb in them. Use them strictly for lighting your way as you walk through the room. I agree with Vincent; the chair in the corner doesn't fit at all, nor does the one under the A/C unit (put that one with its mate behind the love seat). And the curtains look smooshed. I think the problem with the bookcases is that they are uninteresting. Did you buy books-by-the-yard? What are all those identical books? They are visually uninteresting. I'd get rid of some of them and get some colorful ceramics/glass/photos. The room is absolutely overwhelmed with furniture. It needs one less love seat. Do you really need all of them? Pushing them against the walls/curtains so tightly just visually emphasizes the fact that there is too much furniture. I don't think a mirror above the fireplace will work. When people are sitting down (which is most of the time), all they will see is a reflection of the ceiling--the plain, white ceiling. Get some real art in there with some color.

The blue is awesome (grey is too trendy)! The reason it stands out to you is perhaps because it's the only real colour there. Bring in the blue in a window treatment, a small appliance that sits on the counter, a pretty tray or area rug. Also, it is more appealing often if there are more than 2 colours - so right now you have a white and blue colour scheme - bring in red or orange or fushia - something from the other side of the spectrum (like you did with the yellow flowers but in a more permanent way)!

Thanks for the replies! My wife suggested we talk to a local real estate agent, so i think that is a good idea... just that Im not sure how helpful they are likely to be if we arent selling yet :) As for saving for our dream house, I dont disagree, however if doing this up nicely over the next ~5 years or so while we live here nets us some extra in the eventual sale, then that of course will help us as well. Interesting thing happened today actually. I got a knock on the door and one of the older neighbours asked if he could take some lemons from the tree. I of course said yes. Anyway he was telling me he had lived in the street for 40 years. I asked him if the house had always looked like this, and he said no that ~30 years ago the old old owner did a massive renovation and pulled off the timber and put up the bricks and gutted the inside of the house. Interesting stuff!