this is the correct link http://www.flickr.com/photos/48594726@N04/4451638564/

This book might be just what you're looking for:
"A Japanese touch for your garden" By Kiyoshi Seike, Masanobu Kudô, David H. Engel

To hide the gutter you can try a Skyrocket Juniper - it only grows 2-3 feet wide and 15 feet tall. HOWEVER, be sure to plant it at least 4-5 feet from the house so the roots do not hurt your foundation (and also you will be able to access the gutter and paint the house in the future).

Be sure to angle the bottom of the downspout AWAY from the Juniper though, as they HATE water-logged soil - they need good drainaige (I'd plant a bit high and if you have clay add some coarse sand into the planting hole along with a good topsoil).

You may actually be better off planting it in a giant decorative planter (CONCRETE if you have a winter, as both plastic and ceramic WILL crack).

I might be a little leery about having a downspout dumping water close to the JM, they don't fare well with "wet feet". It could lead to root rot, frost heave and such. I would consider having someone come out and move the downspout elsewhere (or if you are reasonably handy, DIY!)
It would be much better for your JM, and you wouldn't have to try to hide the downspout, or look at poor results of same.

As for the design, I'd consider a few more fairly large rocks in the dry creek area, planted liberally with Japanese forest grass (hakonechloa) perhaps along the house, behind the lantern/Red Dragon. I was in the process of slathering my yard with forest grass last year when they named it the 2009 perenial o the year, and the prices DOUBLED, and the plants SHRUNK IN SIZE by 50%!!! (guess I'll have to grow em out and split them)

Good luck wid-dat!