Since the lot you describe is smaller than my open living area, I would suggest looking at some of the "shotgun" house plans around New Orleans,LA. I think you can build up and back and get an interesting home with a loft for space. It can be done, A porch with an entry to a narrow hall at the back might work best for you. Will you plan a courtyard (closed)? or what? What part of the country are you in? What are your local codes?

softyjain, If the windows need to be replaced I recommend looking at fixed steel to maintain the narrow profile of the windows and small window lites. Using fixed instead of operating will be a cost savings if you don't need to open them. Another option for hanging from the ceiling is a decorative light or chandelier. That way you still have light into your ceiling at night. We offer Renaissance solid bronze windows that don't require any finish or finish maintenance. Architects designers love the rose bronze color, which closely matches copper gutters. http://www.houzz.com/projects/152134/Renaissance-Solid-Bronze-Windows---Doors-by-Progressive-Solutions You may also be interested in this ideabook- http://www.houzz.com/ideabooks/18543834/thumbs/Bronze--Copper---Steel-Window-Ideas

HI -- I have the very same bay windows . I put Hunter Douglas wood blinds fitted to the windows and have hanging drape side panels on the side walls on each side of the bay . So nothing hanging in the middle . I have the panels ( 95 inch length ) hung from the full wall height (8 ft.) on a rod that goes across the width of the whole wall. Or you could just have the rod the with of each side wall ,having a finial on the interior ends . So that would be ,two small rods with 2 wall cup brackets and two finial ends . I am not a fan of the shutters because of the cost but mostly because they block too much of the light and view . Have the window blinds and the bay interior the same color .

The walls are painted with enamel. Would love some economical solution to work on the same.