I'm glad you decided to update your room, I have a few questions for you in order to help you. first of all what's your budget? do you plan on taking out the bench, bike, tv. foamy thing or window treatments? are you in a flood prone area? if you are you might want to think about getting fake wood floors

I would paint over the paneling, repaint walls, and replace carpet with some laminate flooring and a add an area rug and new window treatment

Thank you first of all for the replies. Yes I would get rid of the workout bench, tv and bikes. We actually experienced flooding the laundry area and part of the basement carpet. We don't have a budget set. What kind of window treatment do you mean?

in case this helps:
http://www.jcpenney.com/dinnerware/jcp-home-bamboo-woven-wood-roman-shade/prod.jump?ppId=1d6e1c9&searchTerm=bamboo+shades&catId=SearchResults&_dyncharset=UTF-8&colorizedImg=DP0711201215281545M.tif

What's under the carpet? concrete? Any kind of aesthetic you're going for/dreaming of? I took the liberty of looking at your one idea book on your profile, and there was only one picture titled "basement." I would advise starting an idea book specifically for that purpose, writing down specific traits and features that you love. I think you will be surprised at the same things that keep coming up (without you being aware of it) in the pictures you like. This is always a starting point. I was also going to say that if you don't have water damage or mold problems behind all that wood veneer, you can always PAINT IT. It probably serves as some kind of insulation against the cold and damp from outside and under the house, so I wouldn't necessarily get rid of it, unless the painted beadboard look isn't your thing. Saves you some $$, too. Just do a search on Houzz for "Painted beadboard" and take a look at what I mean; there are some beautiful examples. Since your choices are quite classic/rustic so far, I would think this might not be so far from the aesthetic you're striving for in the house. I would also question whether you want to put wall to wall carpet back in there. I know it's comfy underfoot, but you could also put in an under-floor heating unit (even under parquet) and have a few rugs for comfort in front of the couches, for example. You're going to have to identify what exact purpose this room is going to be used for before you go forward. It looks like a bit of a catch-all at this point. If you actually do use the exercise equipment (or have been saying you will, but you don't because it's uncomfortable and icky to use down there now,) I would advise setting up two different areas for that and for the seating, etc... and again, I would highly recommend against wall to wall carpet in that case. It's hard to tell how much square footage you have in there. Best of luck!

paint the wood paneling! It would be lovely a warm shade of grey, not too dark for the basement, however. you could use various shades of grey in your accessories and add a pop of color with pillows, throws and artwork. (I would suggest canvases, they have a nice modern feel to them and are easy to paint yourself, especially if you're going for an abstract/modern look) With grey as your neutral, you can really add any color, even change it up seasonally, for your "accent color". I'd start with deep orange! Good luck and have fun!!

We painted our paneling and it came out great.

We used Allure Ultra flooring in our basement and love it. It's vinyl plank flooring that's waterproof. It clicks together, no adhesive. It looks like wood, but no maintenance.

I agree with the suggestions to paint the panelling and install vinyl plank flooring. You could add an area rug too. Please hang grommet curtain panels that go right down to the floor, when they are closed at night you forget you are in a basement. Mount the rod as high as you can. Add bamboo blinds too. I hope you have a wall for the TV, it would be too high & hurt your neck if you put it above the fireplace. Paint colours Benjamin Moore Hawthorne yellow HC4 and Vellum 207 are soft and warm.

First, carpeting in a basement isn't a good idea. I'd go with laminate flooring and then add some nice chunky rugs. Next, you can paint over the wood paneling, I did, it looks wonderful, giving texture to the walls. Also, you can even paint the brick on the fireplace too, or just tile it in a fresh, new color matching your new decor.

Consider not using upholstered furniture in the basement (for the same reason not to put carpet--holds moisture, breeds mold & mildew). Instead, leather with throw pillows and a few cozy throws to cuddle up in on cold nights.

We have a GAS fireplace in our basement family room. We have discovered that if we keep the door closed to this room, the furniture and carpet is nice and dry, no moisture problems at all because the pilot light is always on plus we put the fireplace on when we watch tv etc. The door is wood with five horizontal glass panels so you don't feel enclosed. Maybe you should consider a gas insert if your fireplace is woodburning.

Check out interior designer Candice Olson's basement renos for more good ideas. She does a great job turning rooms like yours into fresh, classy, updated spaces.

Agree with piedmontdiva to start an idea book on renovating basements.

--Get a good dehumidifier for your basement.

--I think you'll find many with light-colored overpainted paneling that look great--easier and more budget friendly than ripping out the paneling.

--The bamboo shades with give you a crisp look.

--If you're keen on some kind of carpeting down there, check out Flors, which sells great looking attached carpet squares, which you could create as an area rug in front of the fireplace and where you'll place your couch, coffee table, etc.. You could put Flor tiles over whatever flooring is under your carpet. Or consider the waterproof vinyl planks someone upthread suggested and an area made up of Flor tiles, which you can change out if they get wet.

Here's the link for Flor tile basements:
http://www.flor.com/room-type/basement.html

--Ikea style wall systems work well in basements. Run one across one wall for TV, games, etc.

--Furniture. I'm usually on a mission to banish honking marshmallow leather couches from the face of the earth, but a decently proportioned one--not too poofy--in a sectional might be just the thing for a basement, particularly if it comes in sections. MEASURE DOOR OPENINGS FOR ANY NEW COUCH. Face one section to the fireplace and one to a media bookshelf wall.

--Get a coffee table in front of the couch.

You could separate your "sport equipment" section, if there's room by using a long, low bookcase to divide the room. Then put your exercise equipment and bike in that section, which needn't be carpeted.

BPaton, our fireplace is gas as well :)

Love the idea of vinyl flooring and making an area of carpet tiles for your furniture placement. I had wood paneling that I painted and it was great. I would suggest painting it with Kilz first. Then a primer. Then your paint color. The wood absorbs the paint and you would have to put several coats on it without the Kilz and primer.

I would hire a professional company and water proof your basement, other wise you may spend thousands of dollars on decorating only to have to rip it all out in even a small flood, leak.
Depending on your location, mold will set in within days. Do this first, then repost back here on Houzz for advise. I have seen people spend a lot of money and hard work to get a beautiful basement, to only have a heavy spring rain turn there new basement into a total gut job.
water/moister proof first, then jump in and renovate, you will be glad you did.

After a freak storm, our carpeted finished basement flooded with two inches of water or so after a couple decades of no water whatsoever in our former home. All the carpeting had to be pulled up--a mess then we had to hire a company to dry out the basement right away--very expensive but necessary. Finally, we had French drains and a new sump pump installed (the old one failed) before we went the Flor tiles route.

Hi pighinp! Have you ever thought of using FLOR? Our carpet design squares can be designed to your personal taste and will bring just the right look into your new modern basement! We’re also eco-friendly! Check out our website and don’t hesitate to call one of our design professionals. www.flor.com : )

Um, note to Flor. I just suggested Flor tiles in two posts, so no need to flog the brand, which I do think is good.

Yours truly.
Houzegal 200
Civilian Houzzer unaffiliated with Flor

Here's a 3D rendering I completed recently for a basement remodeling. It started out as a bland, little used space and the owner is planning to transform it to a game/media room. Contact me if you'd like similar renderings to help you with your project decisions.

Looks like a fun project. I would remove the carpet but leave the paneling and paint it a nice white or other neutral that goes with your color scheme i.e. taupe, gray etc. I would also leave the brick fireplace as is but add a heftier mantel to it and redo the hearth tiles. I would add built-ins on either side of the fireplace to just counter height to allow you to store games and electronics below and still place the TV above. Flooring can be accomplished through the use of FLOR tiles that allow you to choose any color combo you like and easily replace a square if it gets damaged or stained. Not sure if you have kids but basements are usually pretty well-used spaces. Window treatments can be whatever goes with your style decor i.e. plantation shutters, bamboo blinds, insulated roman fabric shades. Paint and.or reupholster furniture that can be salvaged to save some $ and, if space allows, make room for a quiet reading nook or a game table to create a spot to work on a puzzle, play chess or just work on crafts. Have fun!

I would just paint the paneling and give the brick a paint wash. If the basement is prone to water issues, maybe a polished concrete floor would be an option. Throw some area rugs down for comfort and coziness.

Stained concrete is the perfect flooring for a home gym. You'll never have to worry about flooding or water damage again. It looks sharp! Many of my clients use it in their home gyms.

You could do a moisture barrier subfloor under a floating wood floor. That would give the room a significant sense of warmth. Also painting the paneling is an easy fix to add some brightness. Faux wood plantation shutters would look great on your widows and are very energy efficient.

lots to choose from for large wall
http://www.overstock.com/search?keywords=5+set+art&taxonomy=sto1&sortOption=Relevance&TID=SORT:Relevance