Is the window actually recessed or does it only seem so because it's boxed in by cabinets on both sides? How deep is the sill on the bottom? I would love to have a recessed window above my kitchen sink! Mine is boxed in by cabinets (like yours) but only has a standard depth sill and no room to make it deeper as there is no clearance between the back of sink and the wall/window. If it were deeper I would have a small indoor herb-garden on the sill.
Mine was also enclosed at the top, not with tulip edging but a pine plank with heart cutouts. Hubby has since cutout the plank, sanded and touched up the cabinets where it was removed. This made a huge difference, and you could easily do the same with yours if you don't like the window being closed in at the top.

I agree with guysns: kill the top.

Also a high end plantation shutter (Hunter) with wide white slats would add a beautiful element and not block the view and light if left open. Had the same issue in our kitchen and it looks great.

The plantation shutters would be installed directly against the widow. This can be a tricky install in this tight space, so let someone from Hunter Douglas measure and install them.

(I have have no affiliation with Hunter Douglas! They just custom make the nicest wooden plantation shutters I have seen)