Yes, remove the wallpaper. I'm not sure that I would re-wallpaper because I think it would just really draw attention to the angled ceiling line. I would paint the whole room (including the ceiling) the same light, neutral color. And then when you're ready to re-decorate, remove all of that little crap. You have too much little stuff in there. When you put a bunch of little stuff in a small space, it does the opposite of what you might think .... it makes the space feel smaller. So just focus on a few larger pieces, and by "larger" I mean relative to the space. Having a few keys pieces like a larger mirror and larger light fixtures and one larger piece of art, will give way more impact than a ton of little things that end up just making it look cluttered.

What is the style and colors in the dining room and kitchen Area beside this powder room?

It’s a lovely little room. Storage seems to be an issue though - I can see 3 storage articles (tiny table with shelf, basket on toilet, and box on the floor on the right). That would drive me nuts. Personally I’d do away with all three and find some kind of wall mount cabinet for above the toilet.

Is there any color at all besides white/tan and a brown hand towel? Is there a color in the adjacent rooms?

What wall is curved? Here are two beautiful remodels that may help you visualize your bathroom...love wallpaper but keep it simple but add contrast.

Thanks for all your input. I see what you mean by the clutter and the height of the mirror and picture. Would a small medica cabinet above the toilet to store toilet paper work? Colour ideas?

No. Never put anything above the toilet. A cabinet would be awkward to get to and something's going to end up in the toilet. Guaranteed.

Lol you’re right there!

Have you thought about changing out the pedastal sink for a small vanity. It looks like you can fit one there. It would also have storage under it for some things, and would look very nice.