In addition to my post above...having lived with a fire set in a wall for many years with a vent to let the hot air into the room...I'd do neither of the above....except maybe old cabinets of well seasoned timber and not new built ins up against the wall enclosing the chimney. The heat from that fire and from the vent would affect the cabinets, dry them out, make them crack...especially since timbers today are not well seasoned as when the fire place was built....That enclosed chimney/flue would radiate heat as well...There's a reason why the walls each side as well as the timber shelves are a dark colour and there's nothing built into the spaces on either side. Installing the cabinets and painting them a pretty light colour might look good for a while but not if you intend on making good use of that lovely fire place. I've lived in my current 1900s house for 32 years and have come to know the why's and wherefore's about timbers and heat in old homes. One longs for a lighter environment sometimes but this needs to come from other sources rather than anything against the fire place. Its a bit of a blocker to renovations at times but again, with Wuff, "Embrace what you have"...read up about homes of the same period, surf the net...you'll find some beautiful solutions. Here's one....you could clad the walls either side of the fireplace with a fireproof stone cladding...enlarge on that...may not be your 'cup of tea' but for what its worth in making your place "yours".

I would suggest a stone hearth matching the plain stone trim but not as wide as the whole unit to reduce tripping hazard. Possibly with a black trim edge. Then a mantle shelf. the same stone would be great but probably too heavy. I think a 'live edge' timber mantle would be great and introduce an organic edge to the straight lines and angles. then paint the flat surface a neutral colour as others have suggested. display something with white/cream tones (candles?) and something with an accent colour on the mantle. if mantle too pricey a big artwork a little wider than the fireplace itself with some black in it or a black background chinese screen or similar. I have no commercial affiliation with them (just like their work) and don't know where you are based but Time 4 Timber Brookvale NSW could probably help you with a live edge shelf/mantle. good luck!

Stanislas Piechaczek A wood heater with a fan built into a chimney breast is a great addition to a room and makes a great focal point. Work out the m2 of the space you need to heat to make sure you choose the right one for the job. Some options have a zero clearance firebox meaning you can frame up next to the heater. Check the specs to see what the options are flues. Here are a couple of options http://www.pivotstove.com.au/catalogue/wood/inbuilt-zero-clearance-wood depending on floorplan and budget, there are double sided wood burners from Axis You can plan to have built in joinery as part of the fireplace area to complete the feature. Best wishes

What else is going to be done in the room? The heater revamp needs to be done in context. I'd beef up the mantle. And replace the fire place with a gas log look. Even a fake fire place adds value and atmosphere.