On your paint problem I can't be much help. This usually happens because of damp -- please get a damp expert to make sure that there isn't any damp lurking in your walls. I had this once when I had pipes leaking inside the walls. I didn't know that. The other alternative is something like painting before the plaster is dry or some kind of chemical mismatch. I do know you will have to scrape all the mucky powdery stuff away and start again, at least on those areas. Don't try to seal and prime and repaint until you know exactly what the problem is and how to fix it.

Perhaps a large round table might mean a rug is not at all necessary. It could be a metal tray table, or carved wood like Rebecca Mitchell Interiors illustrates. Ideas also to consider, using multiple tables can be found at http://www.houzz.com/multiple-coffee-tables. I also agree with comments above that some color is needed on the walls. You could then hang round mirrors, or an unusual curved shape like RMI shows above.

First, I think rearranging your furniture and getting the furniture off the walls and float them in the living space would look nice. I'd nail down the arrangement before selecting new rugs. Where the chandelier is, try floating your sitting area (with the coffee table) below the chandelier and angle the current area rug. It's okay (and looks quite cozy and open) to have furniture floating and be able to wall around the furniture. You could have another seating area where the arrangement is now. Oh...yes, your mustard walls can work as is. Let's start with the layout first. :)

Depends on what effect overall you want -- hot tropical feel (oranges and reds) or a bit more toned down? You can take inspiration from pictures of gardens with lime green heuchera or sweet potato -- often paired with chocolatey purple, silvery greens and blues.