Fill it with a two-rod shirred bright white semi-sheer curtain. If the interior side of the window has the same arch, you may need a custom curved top rod and a custom curtain. Be aware that the whole arched area will be white from the outside.

I think it looks fine.

How about a hanging lantern fixture to land about where the innermost section of the window is.

Because the facade around this window is stone, you can't actually change the shape without changing stone facade. There are two other round topped windows, so I don't see the point of changing one without changing the others. While it may be a '90's style, it's far from the ugliest house I have seen of this style. I agree with houssaon, it looks fine.