SFGate

AMN What about something like this? Something recessed and built out a little bit:

AMN And then something recessed-only on the left:

AMN If it were mine, I'd keep the vanity. But, if you want a more open feel, a happy-medium might be a vanity with open shelving or storage underneath.
NOT this exact thing (and obviously narrower than this), but a la
Pool Bath Open Vanity

*You would have to be comfortable with open storage.

OR (less desirable)
small bathroom design in former closet by Bay Area remodeling contractor

OR a floating vanity might work -- but care will have to be taken to match the style of the existing bathroom.
Silver

gmacrandall All wonderful ideas, my favorite is the long skinny cabinet to the left. I never would have thought of that. Thank you so much!!

hopesilver The best use of storage by far, in a bathroom, is to invest in a large DEEP (5"min) medicine cabinet.
I do not like drawers. These med cabinets hold everything from shampoo to make up and are easily
seen. If you have room for a triple sized high one, you'll be amazed. but look at your wall space and see whatever you can put into it, and make sure its deep.
I never regretted doing this , and its in my master bathroom.

gmacrandall Can I achieve a 5 inch depth by recessing 3 inches and having 2 inches hanging outside the wall?

hopesilver also even though the walls are only 4 inches approx., these deep medicine cabinets are designed to come out a bit, and come in all shapes. I'd put them on the wall above your sink and get rid of the towel rack. Towels can be put on back of doors and on other walls. Or folded.

hopesilver yes...i have done this in all my bathrooms. checkout the medicine cabinets they have. it does not look like anything is hanging out at all..you don't see it.

nikitasmom A floating vanity opens the space but includes storage, a basket can go below it. California Cool in the Castro-Bathroom
Between the studs mirrored medicine cabinet Olson Design & Construction

tamela123 too funny--we just took out our pedestal sinks to add the storage of a sink w vanity

tamela123 look up washstands (like in restoration hardware) w an open underneath storage to create the feel of being open--you will still have a LITTLE storage