I'd choose a soft cream/grey. similar to one of the colours in the brick fireplace. I wouldn't address any panelling until either that T.V is replaced or hidden in a cabinet. Bad thing about buying a coffin for that T.V is, as soon as you do, the TV will die. Then you have a cabinet that has no use and will still need to break down a buy a new TV.

Agree with above - DO NOT spend even a dollar for that TV, those speakers or your A/V equipment!! With your budget, just getting rid of that huge unnecessary A/V tower (I'm pretty sure I spotted not one, but 2 VCR's there!) , speakers and TV, and by spending $1500-$2000 at Best Buy or local discount center, they have bundled packages that have new TV's and much smaller speaker systems that will look and sound fantastic. You may not be TV people or an audiophile, but trust me, it's not the paint or need for wood paneling that this room needs. have a wall-mounted flat screen (under $1000) and wall-mounted speakers on either side ($300-$600), a narrow but long sofa table placed against the wall underneath the TV to hold your equipment and that whole space will look great. Certainly you can paint, but start with at least visualizing my recommendation of getting that bulky old equipment out of there and the room will feel newer and bigger. I see you have different furniture pieces covering the wall all the way across... don't be afraid of seeing wall, and if you have a big enough space, try art. By the way, some places will do a free install and mount the TV and speakers for even a cleaner and less cluttered look. oh, and no wood paneling :) good luck!!

What markrousso said!