Do you want them still separated into 2 areas?

The obvious first step is getting rid of the wallpaper which makes the room feel claustrophobic. The second thing which will open up the space is putting in a frameless glass shower enclosure.

Since the bathroom is small I don't think it's worth the $$ to put in a new vanity since you can't really see the vanity when you're actually in the bathroom. Depending upon your color preferences, I would either paint it or put new hardware on it. Then I would tile the top with travertine and put in a beautiful sink and new faucets.

Alternatively, you could buy a prefabricated vanity from Horchow or other suppliers that comes with a solid stone surface.

With the shower curtain closed I can't see exactly what's in there but it looks like it may be a fiberglass enclosure. If replacing the shower and putting in a glass enclosure is not in the budget I would buy a gorgeous shower curtain which goes with the new paint and then swag it with a pullback so it looks more like a curtain in a house, but still mostly covers the enclosure.