I don't know how much value a finished basement will add considering what you have in mind. So do it for yourself.

You can easily replace the stair carpet and paint the paneling a color that is light but doesn't look off with the flooring. You can remove the hardware and boil it in an old crack pot or pan that is not going to be used for food. That will get all the old paint off and the hardware will be usable again.

Now, when you say there are stains on the paneling, is it water stains at the base?

You could look into doing a green cleaning on stair carpet, or as @houssaon mentions, you could alternatively replace carpet. I might try to just touch up areas on paneling that are stained, although from your pics, I don’t really get a sense of how extensive the staining is.

I am not sure what you mean when you say that you would like the space to be nicer for working out. I think the tile is fine, and since you are going to be using a mat anyway, I agree, why replace the tile. If there is room on the other side for a small seating area, maybe bring in a rug that coordinates with your mat, a couple of chairs, and maybe some type of music sound system, if you don’t have one already down there. Maybe a plant or two, also. But actually seeing more of the other side of the space, i.e. more pics, would help.

Adding pics. Third one has the stain.. I think primer may go over this but not sure if it’s water or not.

@freedomplace1 This is so helpful- thank you! By nicer I just mean, a more eye-appealing space. Of course, first step is to get rid of what we have and don’t need (old art stuff, storage etc). We haven’t done that yet because I was debating about the floor. But.. I feel validated in moving on and keeping the tile. The room is an “L” shape so ideally, short path of the L, the work area (with bookcases/books), will have a carpet and the long part will have rubber mats.

My pleasure, glad to help. :)

You have a nice space there. Let me know if you would like links for any of the items I posted or if I can help you to find anything else, etc.

I'd keep the tile. Have the grout professionally cleaned. Put down a nice rug in the areas that you want one. Re-carpet the stairs. You might consider having doors made to cover some of the open storage, so you don't have to look at the clutter.

The staining shown in that picture is knot bleed-through. Hit those spots with a coat or two of a good primer like Kilz, and then paint over in your chosen paint color.

I would leave the ceramic tile (give the grout a good cleaning with Zep grout cleaner and then seal it), then find a paint color that complements the tile color. Replace the stair runner (or paint the stairs if they're presentable) and strip the hardware in a crock pot as others have said. Those changes will give you a lot of bang for your buck.

You did a great job. It looks much more open.

Very nice! Love the rugs, art, paint color. Really nice choices!👌 :)

It looks great! The large artwork adds color and pizzazz :)

Nice space!