Does the tile go all the way to the top of the wall? If yes and you want a window that appears taller you may have to hang the rod from the ceiling. A think a glass pendant light would be beautiful in your window: [houzz=]

Agree, the lamp does nothing aesthetically for this space.

I would remove the shade because it also doesn't seem to coordinate with cabs, tile, etc.

What's your view like? If you want to cover it up to the max, you will probably want to replace that shade with another custom shade that fits perfectly on the moulding and has a valence to finish off the top. A nice pendant light would be perfect here. There are combinations of 3 lights of varying sizes on one strip that might look interesting. I don't know your overall decor, but this would give you good task lighting and visually pretty.

Two other suggestions for privacy if that's an issue
1) Add a decorative "stained glass" type hanging panel to the top and
2) Add glass shelves inside the frame and create a window box for plants. If privacy is not an issue, you could add 3 glass shelves, spaced the way you want, where you can display plants, pretty glass bottles, etc.

http://www.winlights.com/pendant-lighting/lighting-22.jpg

Take a look at this - not the exact thing for you, but to give you an idea of the pendants.

Yes - you definitely have a problem.
First the window treatment. I know you have a pretty backsplash but I would suggest you sacrifice part of it and put your blind (or a different blind) hanging higher up - as high as the cabinet height. I would also make sure it was wider- the visible framework only accentuates the blind. Perhaps a colour that picks up the accents in your backsplash? This will add a "psychological" window to your room as the eye immediately determines what is wrong (i.e. small window) you need to trick it.

Next your light... is it too low and too small. Can you find a light that becomes a bar? You can then promote horizontal lines rather than the vertical which will also help separate your sink area from the "wall" area
http://www.archiexpo.com/prod/f-sign/contemporary-pendant-lamps-led-53524-586400.html
This is just one of many ideas - I cannot find what I had in mind (having a bad search day today!)
But it is the floating horizontal light that matters.

I think your current light shade is too "heavy" looking and blocks your window treatment. The below mini pendants are a few examples that don't visually block and would look great in a small window area.

olldbobbi, the backsplash goes all the way up to the ceiling. i love the picture of the pendant you posted, would that be on a shorter or longer rod?

Southern Patina Interiors, the view is just of our (not-yet-landscaped) backyard. We live on a lake and all of the lake views are on the other side (front side) of the house. I don't feel the need to cover up the view completely, I like being able to look outside when I'm at the sink and I like the natural light that the window brings into the kitchen. I am really liking your glass shelf idea! If I did that, would I just not have a window treatment?

Also great idea with the trio of pendants (so glad I posted this!!)!!

My overall decor, if I had to classify it, would be cottage-coastal (we have a cape-cod style home, that has 'salt box blue' siding and a huge white front porch that runs the length of the house) but NOTHING to do with nautical themes or boat themes. I have creams and greys....some black for accent...the backsplash has some light greens but they serve as neutrals with the rest of our open floor plan on the first floor.

Perfect - so privacy is not an issue and looking out of the window is a good thing.

If you do the glass shelves, wait and see how that goes - you might find you don't need a valence at all, with the woodwork around the window being all you need to frame the window box and plants.

As for the pendant, I would look for something pretty that coordinates with your tile. Start by going to Lowes - they have fixtures on hand that you can see, touch. You can mix it up by getting 3 different shape globes - look at your colors; get one that matches the tile and two other colors that you love that are in the room - go for something bright and happy.

Don't over think this. For every person that writes a comment, you'll have a different idea and it's going to get ovewhelming.

Yours is a simple project, but you'll get suggestions on here that will have you practically demolishing that tile, which is nonsense. Look at other images on houzz of how people handle a window between two cabs - see what they do.

Would love to see what you decide to do in the end. Have fun!

Michelle, are you happy with the height your light is at now? If so, you can hang the pendant at the same height. If not, you can make adjustments :))