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I think it really depends on the style and look that you want to achieve in your house - you should never give someone the advice to use wallpaper without knowing their design aesthetic. With that being said, I think that wallpaper is a lovely touch in older heritage listed home, because you can add the modern touch through it to the home, depending on the pattern.

I would definitely paint out timber frames, they in themselves become the feature if you don't…..and I would hope you mean a soft grey! To "hide" skirts and arc's (I renovate and sell for a living) I do them the same colour as the walls but in a satin finish…..you could do semi gloss….a water based enamel works best. Make sure you prep them well though, either a good sand to rough up, or something like ESP. I always thought rule of thumb for a feature wall, paper or paint, is the wall opposite the greatest light source, ie. the wall that gets hit with the most natural light. Failing that, I think it would look lovely on the alcove/bay window wall and do the inset of the alcove/bay window in a contrast….say a soft version of the pinkish hues in the paper??? You seem to have some substantial pieces of furniture, and a piano, so doing the other walls would compete and look overbearing to me. Unless you are going the whole Regency style embossed paper/stripes/pattern everywhere…………...

We have installed wallpaper behind glass splash backs on many occasions without any problems, the glass usually being attached by a thin beading of clear silicon applied around the inside perimeter of he glass, then fitted the day after the wallpaper install. MOST importantly the INSIDE of the glass be kept perfectly clean on install as even fingerprints will stand out