Remove your existing wall sconce which is in an awkward position, and install a tall thin (ie vertical) sconce on both sides of the arch opening. Then in the opening you have several choices-have a mural painted, or install wallpaper, or paint it .
PyramidDG.com

Frame it out with drywall-flush to rest of wall. Then add a large piece of art or have a photo blown up to a grand scale

I think (but who cares what I think) something three-dimensional would look great. Maybe a rectangular piece with an image in relief or perhaps turn away from something big and put just a long, single tree branch up in the middle... 3D is rad. You feel its occupation of space instead of just gazing at it.

Another note;
Texts on items is tacky. Texts on your walls is a label you slapped on it. And everybody who sees it will judge it. Looks like a hard-to-miss spot. If you put text up there, you'll be welcoming many silent glances from your guests with little to say afterward.

Paint vents to match wall. Then paint accent color on inner edge,sides and top. Possibly a similar tone to natural wood. And place in a picture, painting, tapestry - or what you think looks good!

Like wryrhino, Paint the vent same color of wall and accent color in niche.

Elise, if you decide to go for art, our prints can be ordered in any size. I will need to know your favorite colors to give you some art ideas for this space. In the meantime, you can check out our page... Raisa

I love the idea of painting it. Would I paint the sides too? It has rounded edges... Not sure how to paint the sides.

Displays

Yes paint the sides. It can be a bit tricky, Mask the edges off to the flat part, just this side of the curve. Something like this.

I like what kennywells said. (see kenny- I care) That spot was made for something wild-ish or noticable- or it wouldn't be there. I'm not sure who, but some one does family portraits that look like their faces are encased in a white-ish fog and it's stunning. And I don't know who tho. (great)

You're welcome, Elise. With all this good advice, I know you'll end up with a very complimentary result!

Are the walls textured? I don't know how decals or words would work with that. We have one of those in our house at the top of our stairs and I have a painting in it. I think it's a southwest thing that every house has one of these things. I personally hate them and want to close it up and make it a normal wall! I like the idea of a large canvas to hang in it.

I HATE these cut-outs. I have two in my home. I find them to be very limiting. I hung a huge mirror OVER one of mine. The other I painted an accent color, but have still found nothing to hang in it that makes any sense. Good luck with yours. Its location makes art display awkward, so perhaps kennywells' suggestion of something 3D is your best option. I wonder if these will quickly become dated features - like sunken living rooms. Remember those?

The space could be filled with tree stump sections of about 6-8" diameter cut thin enough to lay flush with the rest of the wall. Or long branches (horizontal or vertical) would look neat, too! You can't go wrong decorating with natural materials!

I vote for a hand painted mural, or a mosaic.

I'm all for keeping details like these architectural designs. I would hate to cover it. They always seem grand and bring interest to any wall. Italy is full of them and I Iove Italy's architectural classic buildings.

I would add a sill to beef up the shelf area and display a beautiful glass object with some dry branches. Good luck :)

You could have a mural painted in it or purchase a decal and change it from time to time according to the Season

http://ca.images.search.yahoo.com/images/view;_ylt=A0PDoXo9KcxR8mIAYSvtFAx.;_ylu=X3oDMTBlMTQ4cGxyBHNlYwNzcgRzbGsDaW1n?back=http%3A%2F%2Fca.images.search.yahoo.com%2Fsearch%2Fimages%3Fp%3Dmurals%2Bfor%2Balcove%26fr%3Dmcafee%26fr2%3Dpiv-web%26tab%3Dorganic%26ri%3D35&w=592&h=765&imgurl=aliminer.com%2Fimages%2Fwalls%2Flebijou1.jpg&rurl=http%3A%2F%2Faliminer.com%2Fwallmurals.html&size=88.9KB&name=Mural+%3Cb%3Efor+alcove+%3C%2Fb%3Eat+Bijou+Jewelry+Shop+on+Dolores+Street+in+Carmel%2C+Ca&p=murals+for+alcove&oid=e4e21c6bec4cfc066bcc7258d986d10c&fr2=piv-web&fr=mcafee&tt=Mural+%3Cb%3Efor+alcove+%3C%2Fb%3Eat+Bijou+Jewelry+Shop+on+Dolores+Street+in+Carmel%2C+Ca&b=31&ni=128&no=35&ts=&tab=organic&sigr=113pdn4d8&sigb=13bsbomhd&sigi=116hu55g7&.crumb=22qIiRnF6xB&fr=mcafee

I agree with Pyramid Design Group, the sconce has got to go if you keep the niche. But I also feel that the niche is placed in an awkward position. Anything you put there will become a focal point.... at the ceiling. Frame it out and sheetrock to be flush with the rest of the wall. Now it's just a nice big wall, not a design dilemma.

These display coves were a lovely idea on the drawing board years ago eh? here is a treatment we have done in situations where a suitable art install could not be found. Painted the inset flush wall & ledge/cove in color to match adjacent wall but in high gloss lacquer; not a mirror.

Don't over do it. Just large art or have a mural painted.

Lots of good ideas! If you go the art, photography or decal route (words in meaningful sayings or tree branches), then look on Etsy.com. I have a photography shop on there too. Which is nancyhehmann. I can customize as to size or media. Photography can be framed (do a collage of a similar theme) Or one large one. Photography can be printed on canvas or metal. If you like black and white that can easily be done at the photo lab. I happen to use a nationally recognized photo lab so I have a great selection of items I can order.

Another thought, I recently saw a metal gate hanging on a wall that looked great. perhaps someone that reclaims buildings would have one. you can google for items these days too.

I like the metal gate idea. Ck world market also Pier One has some interesting stuff. Mix it up think outside the box. No pun intended.

The niche is well balanced wihin the wall and I think it needs to be a focal point of the staircase.

Paint the spot a blue color and add fish figurines of various sizes, and place them all over the wall creating a big aquarium. I did that and it was nice.

you should do this

Did you happen to read the article on 'wall candy' today? Blown glass pieces would be very nice there.

An interesting antique or architectural piece would be wonderful! Something that's arched would echo the shape of the niche as well. An arched wood or wrought iron piece would look awesome - something like this, but you'd want to make sure it was big enough for the space- http://www.thepreservationstation.com/other-html/fabulous-antique-french-colonial-wrought-iron-fan-arch-piece-19th-century.html

would be nice to install recessed lighting in the wall niche.

Consider a full made to measure mirror inset, it will reflect light as well as making it less intrusive as a feature

back lit glazing, possibly stained glass to your own design?

like anything custom here..leaded glass / iron / mirror .. etc or fill it in and go from there..

I would use the wall light below it to project the wall with RGB LED changeable light. You can contol it with a remote and have different colors shown with exciting shadows due to the shape of the wall

I like Decoenthusiaste's idea of mirrors, and since everything else in the photo indicates the architecture is rather plain and hard-edge modern, why not a large artwork that says "up" or something somewhat abstract but with lots of curves and natural variety. I'm not suggesting either of my own photos, just pointing you in a direction. And given the walls' color, stay somewhat monochromatic.

If it hadn't been mentioned already, paint the niche a different color.

Spaces like these are made for murals. Any hand painted scene accompanied by window shutters (also hand painted) that push outward would be wonderful. That would create great depth and interest. I would not recommend protruding anything from it like framed art or 3d objects. Good luck with the space, Tom

How about an art quilt?

What is your general style? How about something organic and totally natural like large branch or vase with an artistic branch? As others have mentioned, paint inside of niche a shade or two darker than surrounding wall.

Something I noticed...when putting in mirrors I always try to take into account what they will be reflecting. In this case, the placement of the niche is such that when you are looking up at the mirror, it will be reflecting the ceiling. That could be interesting, possibly if you are going to be doing some beautiful ceiling art, but that is usually not the case.

I would get rid of it, its a weird place te put anything. Picture how it would look being one straight wall! Than you would hang your art in a different place. Was this a window from the room upstairs? you might want to make the ledge on the other side of the wall.

It could be beautiful. I don't know your style, but how about a huge decorative piece of wrought iron (mounted securely of course), or you could cover the entire thing with a large tapestry.

Personally I would find a large iron architectural piece at a resale age yard. Old gate or something. Center and hang it. The house looks fresh and new so an old piece would be a perfect contrast

Late to the comments as this may have already been mentioned but a very large electric clock. (whimsical suggestion)
Probably be able to tell the time from almost anywhere on a lower floor :)

What I would do is add some floating shelves from side to side maybe 3 rows blow up a few family pics put on canvas and sit them on the shelves add a clock and a few trinkets that show off your personality....

Maybe only 2 rows fit I just looked at it closely

That space is made for a 3 dimensional metal sculpture! I'd do the elms by Curtis Jere, or if you can afford it, raindrops. The size is important so that the sculpture fits nicely.

A large acrylic mounted photo would look great in that space: http://www.lalush.com/cprints/

Elise Franklin what's the progress report re the large wall niche.
Have u come to a conclusion?
We're curious!!