Sand the down walls, and sheet rock the inset in the walls if you want to get rid of them (kind of reminds me of a bathroom). Then if you think the moldings have too much paint on them, then I suggest replacing them because it'd probably be too hard to sand off all that paint and it might look crappy painting over them.

You do have enough space for a small dining table , sofa and temple. You might want to section off your temple with a room divider . Here is a link to a page full of choices: http://www.wayfair.com/Room-Dividers-C416703.html Here are some small rooms that have both a seating area and a dining area. Hope they give you some ideas:

Hello Chetan, We have an over complicated ceiling design here. Please go with white and walnut brown on rafters. Thanks Nitin CORNERSTONE DESIGNS Bangalore.

Hello Seema, This color combination may be used with a lot of colors. Do you mind sharing the pics of the Sofa and the room along with the dimensions please. Thanks, Nitin CORNERSTONE DESIGNS Bangalore