I would paint the entire fireplace including the mantel, all trim and shelving white. I like the Whisper White, but you must bring the paint samples into the room to see for yourself. The sheen on all woodwork should be semi-gloss, easy cleaning and looks crisp. I agree with painting the walls and I would paint the part above the mantel the same color as the walls, Summer Hue is beautiful, but once again I have no idea how that would look in your room. The walls should be flat most brands make a fairly easy to clean flat. If the fireplace were the focal point of the room, it could look very cool and dramatic to paint it a very dark gray almost black. But at least in this picture it seems that the entertainment/shelving unit is the focal point. hmm .... better stop while I am ahead.

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.

Unfortunately all your options require custom work: It looks like you need an 18" corner cabinet. You will have to modify the last wall cabinet on the left. As I am eyeballing it, you should be able to cut the last cabinet in the middle and then shorten the left section to fit the space of the wall next to the door trim. It's an option that makes the area looks symmetric. Or you can install shelves over the sink. I would not recommend it because it will take the looks away. And the last option will be to remove the last cabinet, shorten it so it fits over the sink and install a single cabinet where the double one was. This will leave a triangle space behind the corner where the two cabinets will meet. You can block the space under it. Hope this helps!

Keya, glad you decided to take the one reader's idea about moving the armoires in front of windows that you don't need and giving the bed a wall of its own! And, yes, you can have Roman shades on one wall and layered drapes on the other. When I had drapes made for my tall sitting room windows/doors, I had them use the same fabric for the Roman shades for the smaller windows on the other wall. For me personally, in these older Indian homes with all the odd nooks and niches in the walls, perhaps it would be more soothing to have a light/med tone paint on the walls that blends with the drapes/blinds for an 'uninterrupted' look, and I would use the same color on ceiling and beams. (but that is just my thought) I would start the process with a large carpet with your favorite colors, then choose your Bedcover & cushions, then your wall paint and fabric for drapes/blinds ..Not certain what style you like, but if you really like a particular Ethnic bedcover fabric, you can always have them stitched into curtains or Roman shades too. Can't wait to see the "After" pics!