If you can't clean up the painted edge, you could always add a 1x3 piece of wood as molding. You can even carry it up to the ceiling to frame that wallpaper. I don't see that paint color in the wallpaper, or maybe it's a lighter version of the flower centers. Maybe stencil on a design using the darker color, or another color from the wallpaper to help tie it together. Then narrow floating shelves or vertical frames or something in the painted areas it you feel you need it. Maybe turn the bed around so the wallpaper is the headboard.

So you're running two threads on this space? I think you'll be happier with the responses if you stick to one thread for the entire makeover, as it is all inter-dependent - foyer - living - dining. Now that I know that the living dining are together I'd suggest you use measurements from the blocked space above the windows to determine stripe width in the dining space if you go with the wide horizontal stripes I suggested. The pattern is already set for you if you take the measurements. You could also make the stripes the width of your lower window section, or half of it, but use the horizontal lines already in your space to determine the other stripes you may add.

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.

I'd suggest you have a look through the photos section on Houzz - or there's quite a few good articles on how to decorate :) maybe both you & your wife could save pictures to an ideabook with a few words on what it is you like about each one, and it'll give you more of an idea of what type of things you like? I think colour-wise, turquoise and peach can go together really well - maybe a warm cream colour on the walls & pops of turquoise and peach in the form of throw cushions etc.? Again, just searching on Houzz can give you some great ideas - just literally searching 'turquoise and peach' brings up quite a lot of pictures :) to get you started I've just picked out a few which I personally think work well :)