Correct me if I'm wrong but drenching means every micrometer of the walls are painted one colour--including the hard window treatments.

IF this were my room I would remove the chair rail and put blue grasscloth from ceiling to floor leaving the windows and mouldings the current white.

It’s hard to tell without seeing photos of the two long walls. You have a lot going on with the large light fixture, dark table, red chairs, patterned rug, and shutters— in a good way. I suggest keeping the envelope of the room a simple warm white. Keep the chair rail and “drench” walls and trim in the same color but different sheen.

Don’t use real grasscloth if you have cats, they love it!

Seems like a pretty busy room already. The windows are awesome - I think I would let them continue to be the stars.

Maybe a more eclectic chandelier/pendant for the space?

Maybe paint the walls in the aqua-green in the rug. Something like Farrow & Ball Teresa's Green No 236.

I added two more photos because I wanted to show that the room has two large openings in case that changes the perspective on whether I should put the darker color on the walls?

The large openings and windows on 3 walls may break up or diminish the impact of color drenching or wallpaper. Consider sticking with paint in a neutral creamy white.

Just making an observation that a dining room is one of the few rooms of a house where it's actually appropriate to have chair rail.

Beautiful room.

The chairs and rug don't relate at all. This is not a problem in my mind. It just means you have to embrace a dramatic and eclectic look - meaning, don't match the walls to the rug, or the chairs will look out of place. Just let it all co-exist. Including your lovely chandelier.

My go to dark blue black is Benjamin Moore Raccoon fur.

Do not paint the walls a dark color in this room unless you also paint all of the trim and shutters the same dark color. Different sheen is fine. Dark walls with pops of contrasting trim are going to look like a circus.

I think if you wanted a dramatic color on the walls either in paper or paint, you could paint Only the chair rail to match the walls, because there is a clean vertical end to the chair rail where it abuts the vertical casings and does not overlap it.

I lived in several different 1830-40 houses and went back to the original layer of paint in two of them, and there were different colors on things like the shutters and secondary trims in some of the rooms. The picture rail was the wall color for example, while the major door and window trims, (which were Ionic pilasters in the biggest room) were a "white".

There are a lot of general guidelines that make a lot of sense overall, but there are exceptions to most of them.