hang a curtain track attached to a piece of wood suspended below the ceiling (anchored in overhead beams) with drapes or panel blinds or roller blind or venetians could work and/or what about an island bench made out of kitchen cabinet on castors with space for stool under overhanging counter

I agree, a unified floor will help with the feeling of a bigger, uninterrupted floor. I think the white on walls is fine, although I also think a soft but warmer tone might be suitable so the ambience is still warm and inviting. I can see an angled wall that appears lighter than the left of kitchen, I would hang a large mirror on this wall, to create a false room beyond, the angle will help reinforce this idea, and is a nice touch to a dining area, however informal. I would also take your lounge and try to position it facing your window. I assumes there's one in the far end we cannot see, the sofa could be away from the island back creating a walkway, and consider relocating your sideboard below it elsewhere. I can imagine it even along the back of the sofa as a console table, a lamp on top would create the perfect scenario for night reading and ambient light.

Hi, which way is North, and how much space do you have to the four boundary fences? Is there anywhere within the block, that you are not allowed to build on (easements). Are you in a hot state?

my suggestion has an ens and wiw and uses the old bedroom door for a linen cupboard, although the toilet could be placed at either end to be closer to the original sewerage, this arrangement allows for more privacy for the toilet, more standing room near the shower, wall space for a towel rail and room in teh wiw for a chest of drawers..the vanity is over 2m long with cabinet under the (one or twin) sinks and open shelves next to the toilet for towels .. and, while you're adding the new ens, it would be worthwhile to plan the new access to the kitchen and new laundry