How about something you can move, need be. This one is up off the floor to minimize size, the top mimics your bar chair finish and the base connect to your hardware.

The room is a little bland. Consider adding a really rich color to the walls, plus the rustic farm table idea.

The rustic farm table is a great idea.

galvarezfonts - I found a few pictures you might like:






Lyvonne
www.essentialsinside.com

More then enough room for an island, and if you don't want a permanent one, you can have one that has wheels.

If you add the island it adds more counter space of course, but you can also use it as extra cabinet space that you can move. If you want the island stationary you can add the bar for your kids to sit at and have breakfast or whatever. I don't think you really need to remodel the kitchen and the format, being simple, new paint and new appliances. More complex, add a peninsula.