The first thing you need to do is remove the dropped ceiling -- although this may be risky if you don't know what is behind it! It looks as if it was installed in the 70's for the purpose of fluorescent lighting. Anyway, the curtains and valence over the window need to go and be replaced by some sort of blind or screen shade (roller, Roman, etc.). A nice tile backsplash would look great and Home Depot has many reasonably-priced, contemporary colors, materials, and patterns. Painting the cabinets would be good; however, just adding new hardware can go a long way. Check out door hardware on the Ikea website. You'll be pleasantly surprised at how nice and inexpensive it is! There are some very nice vinyl floor tiles that are easy to install and actually look like ceramic tile and/or stone on the market these days -- check out Armstrong flooring products. Good luck!

I'm not sure what the drop ceiling is hiding and I'm afraid to look :-) We've been thinking about using plastic panels, maybe ceilume panels to replace the mineral board.
I've been unsuccessful in my search of nice vinyl floor tiles. We have about 4-5 layers of old vinyl/linoleum under the existing tile and I'm not sure if there's hardwood under it all. We actually have hardwood throughout the rest of the house and would love to have it in the kitchen as well. Just afraid to start pulling up all that vinyl only to find the wood underneath is not salvageable and would require expensive reno. Any suggestions to replace or reface existing countertops?

Instant update - take down the pelmets and nets, and replace with blinds. New cupboard handles will make a world of difference. The floor? A nice big cheery rug to add a zing of colour.

We can help with some new modern furniture and lighting at reasonable prices. Maybe a new pendant over a new table and chairs would help? Let us know if you have any questions about our products. :) http://www.eurostylelighting.com/

This is me, and I'm kinda crazy, but i would rip up all the layers of vinyl....I bought an old house a long time ago and I ripped up what i could...the floor wasn't in good shape, so what I did was buy furniture grade plywood and cut them into 2'x2' squares and stained some and painted some and did a big checkboard floor. Turned out great...but by doing this, I also knew that it could be tiled over at some point in time, in the future, if need be. I had a fresh flat surface to work from when the time came. Enjoyed that floor for years however. I am a bigger fan of wood floors in the kitchen rather than ceramic tile personally...mainly because of temperature and breakage when something hits it. But that is a personal opinion. I have also seen very cool plywood floors (4x8 sheets) . Whitewash them, stain them, use floor paint and get creative! Then later if you want to do something different, you can on top of them!
Countertops....depends on how handy you are....we did concrete countertops in our kitchen for a minimal cost. I bought handles/pulls on ebay for a much cheaper price than I could have purchased them in a local store. You can also get euro hidden hinges, but you should buy them in a contractor's bulk, because individually ( a set of 2) they are expensive.
Not sure how much countertop space you have, but I've seen a couple of colors that are in home depot ready to walk out the door. Not crazy expensive...but your countertop actually looks like a pretty neutral color to work with. You may want to do that later.
Don't be afraid of the ceiling....conquer that thing! Then you can change your light fixtures and update those as well.

I agree with mpoulsom -- pull up the many layers of vinyl flooring. This is inevitable...and will make the installation of the new flooring all the more easy.

Yes, rip out the old flooring. One tip that might help is a heat gun set on low should soften some of the adhesives or tile layers. Then, you can scrape without having to worry about tiles splintering into small pieces or breaking apart with sharp edges. A narrow blade screwdriver works well to pop staples out of old underlayment.,

What do the underside of floors look like from the basement if there is one? One option is to flip the floor boards, then sand them. What about taking the doors off upper kitchen cabinets to use as open shelving? Paint the heck out of it and yes, curtains need to go.

That's not the 1920s....it's the 60s or 70s. Old post, but still, I had to let everybody know. :-)