Our transoms are stained glass (pic is from 10 yrs or so ago pre decorating):

We have 3 of these windows in our office & LR. I tried curtains beneath the transoms due to the fact that the ceilings are so high & the standard curtain length is from the bottom of our transoms to the flr. I didn't like the look of the curtains hanging below the transoms. It cut the windows off and made them look far less substantial & somehow 'squatty'.

I ended up installing matchstick blinds underneath the transoms to cover the lower windows & then hanging curtains from the tops of the transom mouldings. It sort of frames the transoms. I like it and the overall effect is that I have even more substantial windows.

I second what ttodd says about the match stick blinds and curtains. I have transoms in my new house and have done a lot of research looking for photo's of different window treatments and having the drapes all the way up past the transom does look better. I have been contemplating the possibility of putting a shelf below the transom and putting plants and/or colored glass items to help dress the transom, but not block it.

I'm drooling over ttodd's picture and I think you're right to leave the transom separate, not covered. I have a transom over my front door and I'm about to turn it into a stained glass window with Gallery Glass from Michaels. You can do that with yours, you know. :)

I had the same problem, and ended up hanging drapes above the transoms. I've been pretty pleased with them, but it is in a bedroom and I needed light control and privacy...these are on a traverse rod and I just open them in the morning and close them at night.

Here is what we had in the last house. There were four of these narrow French doors along the front of the house. You can see the rest of the doors in the ginormous mirror over the mantel. We had lace on tension rods to cover the glass for privacy, then I added the panels just for looks. (I was under the gun for a Holiday home tour and also under a tiny budget -- it worked out to take pre-made curtain scarves and cut them basically in half to make panels).

Brpinson, your bedroom WT is simple, but elegant.