I was going to recommend mirrors. What about adding some framed mirrors the size of the panes to the wall below the real window. You can add a sash for extra realizm too. Then hang the curtains from the ceiling or on the wall as high above the window as possible hanging just a bit below the faux sash like a 63 inch length curtain would be on a standard window.

I saw the following done in a magazine a couple of months ago. They took short height window shutters and mounted them just below the actual basement window. The bottom of the actual window then looked like the center of a double hung one. They then added a faux window sill (ledge) under the bottom of the shutter (which were nailed in place). It really looked like a normal window that had closed shutters at the bottom.

Then you could do a valance or tiers or tie-backs or whatever.

Plain old window shutters (not plantation type) are fairly cheap at the big box home stores. They can be painted or stained.

Combining a few of these ideas might just do the trick ....

First -- mount the closed shutters below the window as mentioned above.

THEN do hang full length curtains -- and make sure the rod is hung right at the top of the ceiling. The curtains will hang down the full length of the new "window" -- and again -- help foster the illusion of a taller and longer window.

And do add other "vertical" elements in the room. For example (just an example) -- an taller armoire with some strong vertical lines ..... OR perhaps some tall posters.

Wow, those are great suggestions! I'd be "all over" them, if I were you. Very clever and a great lesson in learning to "see" something that isn't necessarily there!

Great ideas, all!! I'll start looking for shutters at our local Habitat resale store.

I would skip curtains and just do two layers of shutters - one on the area below that remain closed, and the others over the real windows that can either have the louvers tilted, or be opened and folded back depending on the look you want. If the louvers are to be tilted, you may have to build out a little framing to mount the shutters to give a bit of depth.

I would also not count on the windows for your lighting. You should have lots of lamps, some reflective surfaces like mirror or metal finishes on lamps and decor, that bounce light around the room. Squatty windows up high on the wall won't give enough light when people are sitting to really make the area feel warm and cozy.

Do these window look out into window wells? If so I have heard of things that create a visual look of seeing outside rather than just the well itself. they may be better if you chose a more simple design that won't draw so much attention to itself. these look rather hokey to me, but I think the idea could be explored, especially if the window treatments filter the view somewhat.

Here is a link that might be useful: decorative window well liners

Wow! That looks great!