Is it deep enough to put pictures or collectibles?

I don't know how involved you want to get but I'd carry some "faux casements" below this high-ish wainscoting. 5 rectangles on longer walls and 3 on shorter walls, keeping with the same stacked crown moldings but smaller. You'd need some crown by the ceilings to pull it together - or forget the fussy casements and match the wainscoting for crown at the top. I'd go with a buttery cream on the walls and a rich white for the trim. But hey! That's just me.

Raised panel - sorry.

A feature colour on the fireplace surround would go nicely and then another colour all the same on the rest of the walls like you said. I would keep the ledge white or off white. If you work off a pre-made colour palette that you like, then the colours will coordinate well. E.g. Benjamin Moore Cloud White for the ledge with Gentle Grey on the walls and then the surround could be in Westcott Navy. Check out the pre-made colour palettes at your local paint store. Lots to choose from.