No shutters please on those windows. You could do a top down shade just on the bottom of the windowor even a very simple roman blind just on the bottom windows since the kids probably are not tall enough for anything important to be seen from the top windows.

i'd not worry about cafe style curtains dating the space. its a homey home kind of space, just choose a fabric that is updated rather than, say, a floral print.

you can 'sew' your own. iron on tape the hems, clip ring onto the rod. purchasing ready made is odds are cheaper, but when you do your own you have a much wider selection.

Yes, it is only necessary to cover the bottom for privacy.

Really pretty house.

Eta you could do a decorative film on the bottom panes. I think it's relatively inexpensive, it's removable if you ever want to change it, and light will still pass through.

I agree that you don't want to cover those beautiful mouldings. Have you checked into window film that can be professionally installed on the lower portions of the windows? I've seen it where it has a mirror effect when looking in from the outside. That might be a solution.

Buy $10/panel readymade sheers from amazon in a standard 36 inch length and install three tension rods. If you need longer, buy standard 84 inch panels, just use iron on hem tape.

Yes agree, privacy window film on bottom half