Couple of pics would help. As for " keep the smaller window, frost it and have the builder remove the inside trim then completely drywall over the window keeping the look of the window outside but losing it inside? Will it look half ass and dickie?" Yes.

It will be a very tight fit, but if you purchase a prefabricated - very small shower - it might work. The shower would have to be 36" wide with a corner entry, but I don't know how much room you have next to the toilet......? It's tight. so I am not sure about the width of the shower. You will have to measure the space. The stacking washer and dryer would be freestanding next to the shower at 24" wide. I agree that it would be better to have a tight bathroom and have more room in the kitchen.

Do you want this to be a big reno? meaning, will you replace things totally or do you want to work with what you have mostly? will you add a toilet to the bathroom? if you replace the vanity, you can put in a larger one curving around the corner with a medicine cabinet above. If you replace the shower with one flat on the ground, you can also put in clear doors for bigger visual space. how about re-painting as well

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!