It depends on the vibe you're going for. Right now the room is very quiet and calm. If that's your goal, I might choose solid linen drapery panels (lined) in a strong color. If you want to liven things up a bit, chose a nice big graphic pattern on the panels. Please hang them much higher than the current rods.

I love the idea of linen panels. Should I do double hung? What color?

Go with heavier or fuller, with pattern and color, because this space needs some.

I think it needs a subtle pattern or trim to add interest, lovely room

I think a clear and very light weight curtain would look very nice, unless however you actually use the curtains for more than a decorative look. I also think, in this particular living room, (I LOVE the living room by the way. So cute!) that a grey curtain with a white pattern on it would tie in the grey on the couch. I do think that the height of the rods are fine as they are though. Unless you have a thick trim around the windows, it might look a little wimpy. This is what we did in our living space. Granted, we were idiots when we bought the wood and it leaked sap, causing those stains. LOL! But, you get my point I hope. Let me know what you end up doing! :-)

But if you have a trim around the windows, then I agree with DeCocco that the rods need to be raised. :-)

Raise the curtains, double up on the panels, and lower the art.

I think soft teal curtains would look sooo good, and I have seen lots of really pretty glass bowls and other decorative items in Home Goods with that color you can accessorize the table with. A few colorful pillows too maybe.

It might be useful to see some window treatments in some photos from our design portfolio.

If it's not too wide, I might move the octopus to between the windows and get something larger for behind the sofa. The octopus is a little small.

I'm really high on these natural burlap curtains from Ballard Designs:

The art should have its bottom frame 5" above the sofa and all the curtains should hang at the height of the spot where the walls meet the lowest portion of your vaulted ceiling behind the sectional. A lighter color will enlarge the room visually. Grover's got it right.

Remove the fake tree and scoot the console wtih TV over toward the window...too crowded.

More art and maybe a little bling on the coffee table:

I stand corrected. All the pictures where people photoshopped the curtain rods a bit higher REALLY make a difference. I didn't realize how much of a difference it makes! You learn something new everyday. Haha! Ignore my comment and leave it to the pros! :) Post a picture of the finished product! I'd love to see it!

The rod height makes a vast difference!

Yes it does!! Design and architecture is one thing I would love to do with my life, (that or automotive design), so it's great to learn these things!! Design is a blast, but is not as simple as just slapping some stuff on a table! It takes serious creativity! Sorry for my little rant in this comment. Haha! I'm just passionate about it! I'm 16 and in a couple years would love to study design!