I've seen a lot of houses over the years that have the same layout as you with the back of the cabinets facing another room. One good thing about having an open counter there is if or when you have snacks in the living room, you can place them on the counter.

It is what it is. Your only options are to knock out top cabinets and lose that storage or drywall the back of the cabinets and close it up.

Just brainstorming. Could you paint the back and side the same or coodinating color as your wall? Could you add strips of molding to create some frames? Could you add reclaimed boards? Or ripped plywood either painted or stained?

Treat it like a buffet- could add artwork or trim (false panels?) to bottom.

I would definitely suggest removing the uppers if you don't need the storage.

I agree that the top cabinets have to go. As far as the base, I would suggest gluing mirror panels on the living room side of it. That would give the illusion of a bigger space.

Stone backsplash from home Depot.

I have the same problem and can not remove them. What did you end up doing?