I think this photo is a good option. You could paint black, then come back and do the grout a gray..

Thanks Darzy, that's another creative paint option I hadn't thought about.

or you could place a huge painting on the mantel and maybe some tall vases on either side to break up the wall. Or you can sheet-rock over it.

You can paint it or wash it (wash is a watered paint, or you could use stain). Either way won't be that hard if you forget the brush and roller, instead get one of those lambs wool car washing gloves to do the trick.

Have you tried to have it cleaned? I bet it has changed quite a bit since it was new - in 20 to 30 years. It might be worth it to have it cleaned, even if you decide to paint it. Personally, I would clean it and then get a large print with a large mat to sit on the mantle.

I looked at a few photos for stone fireplaces and there are some with a stone called ledgestone that is similar to yours. The big difference is that there are few with grout lines and none with the diagonal end cuts which dates this fireplace. But here is one that is a lighter color with grout, which looks good:

Having it cleaned is a great idea. If nothing else it will help with the painting/staining if you decide to go that route.

But that look is very stylish right now.

Now they usually do "stacked" ledgestone, so it looks very different. All the ideas above are good but have you considered having it stuccoed over? Not sure it is a budget solution, but might be a smoother option than the rough surface. Looks like the slate intallation was an after thought and might could be removed easily. If the floor underneath is damaged replace the slate with something else, or do a little repair and refinish on the flooring.

This is what I did with my fireplace which was similar size but was red brick. I drywalled above the mantle, painted the mantle white, purchased left over lower end granite for below the mantle and had it installed for minimal cost, used fireproof spray paint to update the firebox and cover. I can't take a picture for you because it is now a rental property. I'm not sure how much money you want to spend or what resources are available in your area, but it turned out great for under $500.

Thanks for the input everyone! @ alisondjones - glad someone appreciated the mullet reference! @ Linda and decoenthusiaste - thanks for the suggestions, but just looking for an interim solution since we plan to redo the whole thing eventually. I think you're right that the slate is an after thought (it matches tile used in a recent bathroom remodel by the previous owners). Thanks for the tip on the fireproof spray paint for the firebox.

I know painted brick looks good and I like that style, but since our fireplace has such irregular grout lines, and an uneven surface I wasn't sure if I'd get the same look as painted brick. I think we're just going to give it a try - clean it first, try doing a paint-wash effect, and if not solid paint. It certainly can't be any worse than how ugly it is now...

Re-facing your fireplace is not that hard and the cost is under 5000, its worth the investment as home buyers look for a fireplace

I actually like really the stone and wood retro lodgey look and it would look much better if it was cleaned. It is always best to clean well before painting or staining anyway, especially since there is probably 50 years of grease on it. There are a number of spray on cleaners and poultices just for masonry out there. It does take some elbow grease, but the difference can be worth it. Get the whole family involved with loads of rags and towels, a couple of stiff bristle dish brushes, work in teams--one scrubs and the other rinses and wipes-- and call it a workout.

http://www.ehow.com/how_5553574_clean-interior-stone-fireplaces.html
http://www.litosonline.com/en/articles/en/124/how-clean-natural-stone-house

It might be a big job to change if the brick is still underneath. If you drywall or whatever over it, it will add a lot more weight to what is already a very heavy unit. Make sure the footings are good if you don't remove the layers.

Limewash is a possibilty that would soak into the stone and not look artificial.like most paints.Here's a link how--could be fun if you are the artsy type:

http://www.earthpigments.com/casein/milk-lime-paint.cfm (all kinds of natural paint recipes)
http://voices.yahoo.com/tips-whitewashing-walls-paint-recipes-for-1585093.html?cat=30

I agree that some colorful and large scale art and accessories would really perk it up Possibly even backing the bookcase with a lighter color and giving the ceiling a fresh coat of paint would perk things up for now (even if it is white it can make a load of difference). You can also gently clean the paneling.. and if you don't like the hearth slate, you could get a nice hearth rug or runner to cover it up. Help mop up any doggie spills too..

Thought I would share our progress photo. After scrubbing the fireplace sparkly clean, it looked the same. So we painted it a nice light grey which really brightens the room! We still plan to add a solid white mantle shelf over the existing flag stone shelf to break up the grey, add some larger art work/decorations above the fireplace, and tweak the bookshelf decorations. But, for now it is such an improvement!!

Looks great! Have you thought about adding another color to the grout lines to separate the stones