Curtains to the floor with kitty castle is just begging for some American's funniest home videos.

I would consider mini blinds with valance. Looks small enough for just the bottom half of cafe curtains or a couple of cute tea towels on those curtain clips and small tension curtain rod. it depends on how much light and view you want and the style of the room.

One way to make window look larger is to hang the valance just below the crown molding with it barely covering top window frame.

I kinda like it as is with that dark wood trim. Anything more than a few crochet dollies or hankies for a valance will hide that trim and give the residents of that kitty tower more swinging opportunities.

What purpose does a window covering serve on that tiny window?.

So in the winter people cant see me run by in my nighties (or worse) when the lights are on LOL. its a busy street and you can see right in when its dark outside

Inside mount solar shade, roman or really whatever you like

Zebra style blinds:

Inside mount roller shade.

Frankly curtains to the floor is like dresses to the floor. Yes, a floor-length gown is more formal, but other lengths work just as well, unless you want a very formal look.

I disagree that floor-length curtain panels are always formal. The fabric has a big effect on formality. Sheers, linen, cotton, prints are all more casual than silk or silk-lookalikes.

The type of heading also affects the formality--goblet pleats and pinch pleats can be more formal than grommets, tie-tabs, and plain shirred on a rod.

Depending on what is going on in the rest of the room, you could use floor-length curtains to disguise the small window and make it appear larger. Obviously the cat playground would need to move somewhere else.

Wooden Roman shade could work too.

None. it doesnt look like you neneed it for privacy and unless the sun is problem, why bother?