You are going to have to tear it all out. Plan ahead before dismantling anything. First thing is to investigate what evils are being disguised by that dropped ceiling. Push a few of those panels up and look around with a flashlight. See if there is any plumbing, electric to ventilation stuff in there. Since up you don't have a lot of kitchen, go online and search for "ready to assemble" cabinets. RTA is one company. Be sure to get the kind that have cam locks, they go together very easy. Those sites have design software, but you can get a free and very nice layout from Home Depot and Lowes. Just bring your measurements. Get smaller than normal appliances. Especially the fridge. And pay attention to whether you need a single swing door or not in such a small layout. Find a local carpenter to install it for a few hundred dollars. Use a plain Corian for countertops to save money and then you can have a fun backsplash if you want. This can be a very cute space.

Good advice from chromatic.

One thing I forgot to mention, we only plan on staying in this home for about 2 years. So we were hoping to not do a complete gut!

You have to do something with the ceiling. Anything else you do will be a waste if you don't fix it. The kitchen itself appears to be in decent condition.

Great tips here! Where I can post my kitchen (dated) for some feedback? You guys are great!

@Carol - just create your own new dilemma and Houzzers will comment!