Family room-What to with walls and celiling.
Paint the wood? Leave the wood? Take down the wood and replaster to match rest of house? Carpet will be gone and original hardwood restored. Ceiling sheet rock will be replaced by smooth sheet rock ceiling.

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I also like this brown stain treatment on the knotty pine walls combined with the lighter finish hardwood floor: Manor Home Remodel
I didn’t think I liked the stark white trim but I found this fresh style example that might inspire you. See: Beach Cottage Living Room Even though your style might not be beachy, the color and textures work. In this case, I’d paint the casing around the window white.
Whether or not you change the knotty pine, I would paint the brick. Also, changing the layout of the room will go a long way. I can’t imagine sitting in that couch and being comfortable about the opening above my head. It doesn’t look like a useful pass-through, but a table beneath it would help to visually ground it.
This room looks like a conversion of an outdoor space or an addition. If you've found hardwood floors under the carpeting, they were put in place when the space was built. Either the wall to wall carpeting was added on top because it was the style or because the floor felt cold.
One last thought: I have a pecky cypress paneled basement in my 1935 home. When I added insulation behind the paneling I found, much to my surprise, that the vertical boards were attached to horizontal framing. That might be the case in your house, which would be a consideration if you decide to remove the paneling.
Also, definitely move the couch. Cafe curtains at the windows?
Don't know what's to the far left of the picture of great room. same as the large window to the far right? Maybe it could be french doors to the outside? or swap from the opposite end, and maybe that's where the garage is?
See how you like the brick after the wood is painted and decide then. It will probably be much better looking at that point.
That round basket chair is among the sought after mid-mod shapes, so keep it if you can. You can easily change the fabric to something that goes with your new look.
If you decide to keep it, a friend just acquired a house with several rooms of knotty pine that she thought was dark and dingy. She went to town cleaning it with Totally Awesome and hot water, followed up with Liquid Gold and it looks much brighter.
I love the idea of plastering the brick, that would look great.
Paint everything, lighten up the space it will be amazing. The pix is inspiration for a color scheme for your room.
To address staining the panelling. This also will compete with bricks. Great idea in many instances, but not here.
Remove panelling, drywall and paint. I love the colour in Betsies' picture. It will make the washed bricks a feature . The large windows will lend this room to be a relaxing place. I do love the coffee table. Stain the top dark and paint the bottom white. It reminds me of folkart furniture.
You are so lucky there is hardwood, room will look Fab!!
Good luck .
Before you start any paint project, you want to ensure that the surface is clean, dry, and dull. When painting over finished paneling, prep is a very important first step. First, rough up the surface of the paneling with a pole sander that has been fitted with a sanding screen (rather than paper). Next, apply an interior oil-based undercoat primer like KILZ Original. It is important not to use a latex base because it would allow moisture to get underneath the paint, causing the paneling to swell and mildew to grow. For the grooves in the paneling, use spackle to fill in gaps and allow it to dry about two hours before sanding. Finish the wall with another coat of oil-based sealer and allow it to dry.
Now the surface can be treated like drywall so you can proceed with applying your preferred top coat.
If you live in an area where products that contain volatile organic compounds (VOCs), such as solvents and alkyds, are banned you will have to find a substitute. We would recommend our newest product KILZ MAX as a substitute to an oil-based primer. It is a water-based primer, sealer and stainblocker developed with new technology that’s formulated to perform like an oil-based product. Currently, KILZ MAX Primer can be found at The Home Depot and Lowe’s stores in California and The Home Depot in Philadelphia, PA.
We hope this helps. Please let us know how it goes, we always love to see before and after photos!