If you want to do beadboard or paneling I'd do the whole bath, halfway up, of course. I have it in my bath and it really makes a difference. Easy to clean, too.

If you just want to decorate the wall under the cabinet, I'd go with a colorful tile.

I'm not so sure you need anything there except to paint it to match the rest of the walls. You could add a glass shelf for display if you want. I like the color green that you chose.

If you really want something decorative, I think glass tiles would look nice.

Hi, I would love to just paint it the same color and by the way the color is a light beige not green, lol but DH said since i pulled the mirror off wrong i have exposed a layer of the drywall and i will not be able to paint over that without replacing that part of the drywall, so thats why i was thinking tile or something. I think it would look bad if i just tiled that one spot and not the rest of the walls? Same goes for bead board. Im just so confused and cant look at it anymore, lol

Just a couple of sheets of glass tile would cover that and you could pick a fun color or a shade of greens/browns to blend with your paint and new cabinetry. Low budget and low commitment (under $100 all in, I'd think) so you can change it out later.

If you get ambitious you could paint the vanity so it's not so light against the wood tones of the new cabinets...

If you really want to paint it, why not repair the drywall? If you can"t DIY, do you have a friend, relative or handyman? It's really not that hard.

I think a nice mosaic tile would look fantastic there. Something to pull together the color of the vanity top, vanity and mirror.

I just tiled a backsplash in my son's bath and I used something called Bondura. It was pretty cool. It is a double stick tile mat so you don't have to use adhesive, you just cut this stuff with a sissor. I tiled and grouted in about 2 hours. It was an easy job that needed no tile cutting but for this type of project that stuff was awesome. I never tiled anything before. You would want to fill in the drywall to make the wall flat though.

I agree about painting the vanity, either that or paint the medicine cabinet frame white to coordinate with the vanity.

Doesn't look like you need to replace drywall -- just repair it. If you don't know how, go to a good hardware store or look online. Surely there is a video. There is of everything else! ;)

You will need to remove any loose paper and do what you can to smooth the wall. Then use joint compound and a wide scraper/spatula to skim the joint compound over the areas that aren't smooth. Don't try to make it perfect in one coat -- it never will be (why drywall repair is expensive -- multiple trips, not difficulty). Let that dry, sand and repeat until you are happy with how it looks. Two or three coats is about the minimum -- two might work if the walls are textured. You use the joint compound wetter to add texture. Most walls are done with rollers of varying naps -- a thicker nap leaves more texture on the wall. A repair might work with a sponge. You can practice on a board and wipe off until you are happy with how it looks. Let the texture dry and then you are ready to prime and paint.