Or what about painting the upper green storage cabinets to a light color and then taking the doors off and using it as open shelves.

Take down the scalloped wood over the window!

I would remove the wall paper covering- remove the hardware and fill in the holes- paint out the entire thing to white or off white. Update the appliances- add new hardware on the cabinets where it belong and paint the room- I would also take down the window treatment in the dining area-

Congratulations on your new home. What kind of budget are you working with? Is there funds to replace both the appliances and counter? The wall paper needs to come down and I think if you lighten all the cabinets, and perhaps use a glaze on them, it would give the appearance of more space. I have noticed the kitchen window trim is painted yet the dining doors are not and that looks a little odd. You've got a good useable space with a lot of potential. You must have realised that or you wouldn't have bought it :-)

If you can manage it glass doors on the upper cabinets really opens things up too, and even your everyday glassware and dishes can look lovely behind glass. We have them in our kitchen and it really works and looks great.
http://houzz.com/photos/2132411