Did you install the chair rail? Was the red there before it was installed? I think that you may consider painting the same color above and below or put new chair rail up that covers the paint line, I think nothing between windows too.

I agree with the comment by @quatorze. Remove the pieces between the windows, and because of the way the chair rail is installed, do the entire bay area the same colour as either the wall above or below the chair rail. Installing drapery panels on the left right and even the inside corners of the bay will help to eliminate the transition lines.

Think of a chair rail as functional; it's meant to protect the walls from chairs knocking against it. It was easier to clean the dirt marks off painted wood than painted plaster (or drywall today). Having a tiny piece of rail between the windows adds nothing functional to that area. Also, paint the chair rail one or the other color as walls; chair rails should not be treated as trim because of their functionality.

I agree with the functionality aspect of the chair rail, and the color suggestion that flows from it. Often, the chair rail topped a wainscoting of boards, but you do not have that here. If it were wainscot, you would paint the chair rail to match the trim, since wainscot would also be considered trim. Since the room isn't strictly historic, you can paint the chair rail the same color as the wall, but if you find the room too dull, then you can reasonably paint the chair rail in the trim color, for some punch. Either way, all trim, even a chair rail in the wall color, should be a gloss or semi-gloss finish paint, since it was meant to be an easy maintenance room accessory.

The chair rail was installed when we had the house built. I never really understood why the small pieces were added in the bay window in the dining room. It did seem odd to me, but I just left it alone. I painted the top color on the bottom today. I figured it would be an easier job than taking down and installing new chair rail with 4 young children.

I was originally hoping for something like this picture. Just not exactly sure how it would work with the bay window. It's almost as if the bay window prevents wall designs :/

Picture of what I was going for...

If the chair rail had wrapped around the corner into the bay, then you could have painted your blue underneath. I'm not sure why the carpenters did such a strange end to each rail, it should have had a return where it gets to the door and window trim. Then you would have had a true divide and the line between the paint colors wouldn't show. The bay could have been cream above and between the windows and blue beneath the window sill. Sorry you had to paint it one color for now, maybe you can redo chair rail in the future. I understand the reasoning for chair rails in the past and in small dining rooms but today in a larger room its purely for aesthetics and it was the look you wanted and should have able to accomplish.

I still say do what you want by painting below the rail in blue, the rail itself in white and paint all the bay walls the same blue from baseboard to ceiling molding, if any, with just the window sills and frames in white. If you can easily remove those small bits of chair rail first, then do so, if not, then just paint them blue as well, historic precedent aside. Think of the end result as a church with an apse at the far end...