I would use 2" slat blinds with flowing sheer curtains to soften it

I love the small glass panes across the top. I'd say get wood horizontal bands or a bamboo rolling shade. It would be awesome if you could mount the shades below the panes across the top, so they stay exposed.
I added a couple google images to show what I mean.

woven shades, and then you can add curtains if you want. Finally got rid of all the blinds in the house, no more dusting for me :), at least the blinds lol

Your windows are so pretty. Do you really need to cover them up at all?

You're so lucky to have such big
windows, lots of precious daylight filtering in!

When you mentioned 'modern
rustic' it made me think of one of our recent looks in a similarly large window
area. See Below...

This Light Filtering fabric is Natural Linen. It has been fitted in to our unique, award winning Fabric Changer Roller Shade System. This allows you you to change your room’s look in an instant.

Here are a few more sample ideas that will look great in this setting...

Rich Seagrass, Natural Cream

Our shades can be fitted inside the recess to allow more room around the narrow divide in your setting.

For
further advice or support on how to install don’t hesitate to contact our team at info@blocblinds.us and we’ll be happy to help.

Good
Luck!

Sile