I wouldn't drywall over the window. Take a look at the options for recycled brick, they may match better than you think.

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.

Thanks everyone for the warnings. Honestly I had not thought that could be possible so just in case I'll gear up with a mask to avoid inhaling any of it. I will still need to remove it, but from what I read the problem with asbestos is if you sand it and make it into breathable particles, so ripping it out should be ok. I've looked up in youtubr and there seems to be a tool called mastic remover that you can put on your floor sander and it would scratch the surface removing any of that stuff.

Maybe look beyond the footprint of existing bathroom. We renovated a bathroom where we were able to have a seperate large shower and keep the bath by incorporating a built in cupboard in a bedroom room adjacent to the bathroom. New Free standing storage in that room has resolved any issue with the loss of the built in.