The angles are going to date the space, so I'm going to suggest that you cover the wood with mdf running horizontally (if you use a tall but simple baseboard profile, it will be inexpensive but look like tongue and groove when painted out. That will fit with your cottage aesthetic (from your ideabook). The pieces you buy would be primed, but you can get long ones and use a level and start at the top, you can hide any partial pieces easiest behind your baseboard. Paint the walls all the same . . it will still be interesting. With the lighter floor, and the basement level light, try some different warm neutrals to see what works well with the floor tones.

Let's talk about function before you decide the rest. Do you need another living space? a game room, a football watching space? a man cave? a playroom? a desk and storage space?

All these elements will help drive the other . .