It would look odd with just a curtain rod across the void. You could get a pelmet made, or fill the void above the curtain with a shelf or cupboards though this will involve a little disruption. I would avoid plastering too as it is a messy process that takes more than one day and needs painting too. You may still want blinds on the windows for light control but soften the whole look with side drapes as you asked for. Shutters could also work either way but they are pricey.

Are you buying the shutters online? Or from a store? If online don't they have a contact address to email for further instructions? If from a store, don't they do installation?

Bay Windows can be gorgeous but need more space away from outside footpaths and driveways to look best and the new framework would have to be about 75cms out from the existing outside walls to include a comfortable window seat..and installing a new bay window in an existing window may not be cheaper because you have to first remove the old window and then custom build a new structure and window to suit the available space so it may be better to consider another position around the house, even if it means removing a solid wall..look for a wall space at least 2m wide with at least 1m plus a footpath width clear space outside, preferably looking onto the back garden not the neighbour's side fence

The new work looks tight and awkward, so I hope everybody in your home is skinny and happy to walk sideways like a crab! My main concern is the relationship of the toilet to your living area, and the line of sight to the toilet pan from the front door if the laundry door is left open. Without knowing the size of your home, the number of members in your household, and the number of bathrooms, I would be examining if I really need a tiny bathroom at that end of the house, so a full house plan would be useful. It looks like you are making a lot of compromises (and a lot of expense) to achieve a walk-in-pantry, which is not the most efficient way for storage when things are tight. I would save the wasted floor space in a walk-in-pantry and spend some money on the more space-efficient pull-out pantry option. Remember to think about the function of spaces, and their relationship to adjoining spaces, and how they are going to be furnished and used. This is one of the reasons why people engage design professionals. Best of luck with your redesign, Dr Retro of Dr Retro House Calls/Dr Retro Virtual Visits