Maria, I have used street tree mulch, a few different stones, with one being river stones, in two sizes where I get mine from and one called tuscan, available in a few sizes too and I've also used woodchips and there appears to be no stand out winner or looser, nor have I found that the stone beds cause any sort of harm to the plants, even though I agree with @geluka that the very nature of stones would suggest that they would get hot. Providing none of the mulch is right up against the trunk or base of your plants, midesign0401's suggestions are all perfect, but as far as the cheapest for your rental, woodchips or street tree mulch but as will all light mulches like this, the birds will move them around and it would be advantageous to have a border of some description to try to hold them in, otherwise if you cant or don't have that, then I'd have to suggest stone as it stays exactly where it's put and birds don't disturb it at all either. I have attached a few photo's, the first two of which have the different stones river and tuscan respectively and the last photo has wood chips. You can see in the first photo that I have limestone blocks, mainly as a pretty border to accomodate the raised beds but in the last photo it hold in the wood chips. The second photo has the tuscan pebbles so the limestone edging is much lower and the beds of which there are five, are not raised much at all as they border the driveway.

Oh dear! We have the same type of fireplace, except mine is double brick. I think you should definitely paint the cavities the same colour as the walls, the existing colour seems to chop it up and makes the area look smaller. I love the idea about the stone look wall paper around the fire. I would check with manufacturers instructions beforehand, fires put out a lot of heat and ash and my guess is that it would ruin the wall paper (you didn't mention if your fire was real or gas log). I think Mitre 10 and Bunning's sell a product that's stone cladding ( its DIY) you glue it onto the wall, it looks amazing. A timber mantle above the fire would also look great. My fireplace has shelving either side in the cavities, it seems to balance it out otherwise you have 2 great big empty areas. You could align the shelving or stagger them depending on what look your after. If you go with the shelving idea I would put a couple cushions each end of the cavities near the ledge to encourage people to sit. Fires are meant to be warm and inviting. Lastly I would put a rug in front of the fire to protect your carpet. Good luck! Make sure you post some pics.

I love the timber panelling, maybe with a bit of a clean it will look a bit lighter, but in any case, I love it! I actually think some lighter flooring would make the room work better - not what you were asking about I know! The current flooring being dark and matte sucks a lot of the light out of the room and also makes the timber panelling/fireplace feel heavier. Even a lighter rug (or even a fun Ikea Stockholm rug?) could make it look more crisp, fresh and stylish, whilst still giving a nod to your home's gorgeous retro features. A fresher light fitting - maybe a simple drum style?) would make it look more modern also and less busy to allow the original features to be the focus. Your existing armchair etc suit it beautifully though! The fireplace I'm not sure about - I hate to ruin original features but I'm not sure about that?! Maybe wiht the other changes done it might work much better anyway? Otherwise an interesting tile or sandstone cladding could work beautifully with the timber tones?

You could consider custom joinery that actually looks freestanding - purposefully creating a gap from the edge of the fireplace surround to the wardrobe & on the wall side also. This would also mean that it really does not matter if the front of the cupboards do not align with the front of the fireplace. Adding a nicely detailed leg, and a feature handle (you can get some really unique Australian made ones these days) to give some visual interest to the otherwise minimal finishes. Keep it simple & classic so it ages with your child's taste and preferences. As an example, The Design Files recent article has an image of a cupboard in a lounge area, that could be adapted to two double door units on either side of the fireplace https://thedesignfiles.net/2019/10/interiors-house-p-cjh-studio/. Seems perfect for a child of any age, or even if you want to convert the room to a more 'grown up purpose' once they leave home ;-)