My first question for you is do they have Ikea in India? They have the market cornered when it comes to smart and unique ways to furnish small spaces - and as far as I'm concerned, their specialty is clutter control! It would be helpful if you could post pictures so that we can understand your space a little better. I will say that, as far as paint color goes, the first color that comes to mind is white. It makes any space feel fresh and clean and spacious, and will make the smallest picture or cushion just that much more noticeable. In a small space this is good since you won't have room for a lot of these items!

If you want to highlight the staircase wall then your could use earthy colours such as a yellow ochre! The wall could be enhanced even more by using suitable frames and making a good collage composition for all the photos that you have (I can see many lying on the dining table). This colour would match well with wooden furnitures

Definitely YES!

What soft furnishings do you have. You could pic out one or two colours as an accent colour and use that as your Base for the curtains. I currently have cream hessian walls and have a duck egg blue and chocolate curtains. I'm currently making matching Oxford cushion covers for the settees . If you can't find what your looking for ready made buy the fabric and have bespoke curtains made for you.