I think your instinct is good - adding hardwood or parquet flooring would be too much. I like your ceiling.

The wall paneling is great in a retro 60s (or even 70s) way. So shag carpeting, some groovy furniture, you could make it a thing. But I don't think that's what you are going for here!

I prefer a hardwood to parquet for this type of installation. Parquet I find in more formal settings. There are hundreds of beautiful hardwood floors that you could install that would really perk up the look. But I would remove the paneling.

Good luck!