I'd either leave it as is or put in a slightly smaller pocket door for the toilet room.

I’d close off the linen closet door, install shelving for linens facing the toilet, shift the toilet doorway to the left and install a pocket door.

Or if you want a more open feel, remove the toilet wall and linen closet completely and place a 12 to 18 inch deep linen cabinet facing the toilet on the wall beside the entry door.

Good ideas! I originally put a door there so that the linen closet wouldn't stick out, but for a basement guest bath I don't necessarily think it needs a door so that's why I wanted to remove it altogether. I'll probably keep it closed off vs open shelving, so If I decide to remove the door to the toiled the linen cabinet is a good idea I never thought of.

Can you move the toilet behind the door and put the open shelving on the wall next to the vanity so it's a more seamless unit? Also avoids looking in directly at toilet if that's an issue for you.