I'm confused. I can't get past the Problem: part.....

I thought you had a window in front of your sink. Yet that's where the plumbing drain pipes are? I can't picture it without the benefit of photos.

BTW, I also have a dropped ceiling in a house circa 1985. I have peeked under the panels and toyed with the idea of of swapping the fluroescent for recessed lights and only saw electrical "stuff" up there. So I'm trying to picture plumbing and how it comes down to your sink. Do you have a digital camera? You'd need to post the images on photobucket or another site and link them to the post.

The pipes are running horizontally through the 6 inches of dropped ceiling.
Quote from GC is $4800 for option #3 -- I'd originally thought that for $500 to $1K I could go with that.
Also, option #4 won't work because it would involve massive changes to cabinets throughout kitchen, not just on wall. However, I think having a dropped ceiling along window wall only, protruding out about 42", would look odd.
Help!

I posted something similar earlier today but I am only dealing with a soffit not a whole ceiling. Can the pipes be hidden at the top of your cabinets? If they are clustered in one area it might be worth losing some room at the top of your cabinets, and yours are very tall! That is what we are doing with the pipes we found in our soffit. It will only affect a little used corner and only 4 of my 11 upper cabs. It was either that or custom cabinets and hubby said no! My dilemma was I wanted it open over teh sink and someone suggested curving the ceiling down to cover teh soffit which I thought was really creative. Saw the KD today and he didn't seem to get it..! Will probably just put in a soffit and see if we can dress it up - but I do not want a valance and will try to get teh soffit to blend in with the ceiling.

Sorry to babble on! Hope this helps.

The drain pipe is about 36 - 42" into the room -- 36 - 42" from the window wall and 36" from the perpendicular wall too -- so hiding it in cabinets is not an option. Thanks anyway.

OK, I think I'm following you: The ceiling on the sink wall is going to have to stay at 7.5 feet. The cabs with molding are 3.5, leaving only 12 inches from the cabs to the counter.

For me, this would be unacceptable.

First, I'd pull off the crown molding, which would get you back to 15 inches of free space. Then, depending on how short you are, I'd use shorter legs on the bottoms, dropping the counter height to 35 inches, increasing the space to 16 inches.

Now, if the window is wide so that there's plenty of space on either side of the sink to stack dishes, this would probably be enough. But if the window is narrow, it would still feel pretty claustrophobic to me.

So I'd call a local cabinet maker, inquire about having the cabs for that area modified. Essentially, cutting 3 inches off the top. The doors may or may not be able to be moded, may have to be replaced. If the finish can't be matched, I'd change it to a different color entirely in this area so it looks more 'on purpose'.

This won't be cheap, of course, but it would be better than tossing the cabs out and starting over.

In areas where the ceiling is a full 8 feet, I'd leave the cabs alone.

I'd try to reduce that 42 inch protrusion into the room, though. At that width, it's going to look like a mistake, not a design feature.

Just raising the former florescent area makes the problem worse, since all the cabs would be wrong, then.

I'd bite the bullet and go with Option #3 even if it meant going without new floors & countertops for a while. I'd never be happy with the compromise.

can you hide the pipes in a coffered ceiling?

http://www.woodgrid.com/
(these are pics of wood coffered ceilings; they can be painted I don't know if their products would help you--and you can make the coffers or panels larger for an even more spacious effect)

here's a pic w/ biggish coffers

Here's a pic {{!gwi}}--that might help your GC visualize it. Basically, build a box around the pipes, and paint the upper part of the ceiling.

Here's {{!gwi}}but it sort of shows you how big the coffers will be.

Here's a {{!gwi}}--this might be an approach you could use?

Look at {{!gwi}}, w/ big expanses, NOT coffered next to expanses that are. In fact, look at the ceiling over and in front of the sink--and how it is LOWER, and then the coffers begin.

more about coffered ceilings

Then you'd have space for the pipes to run, inside some fake beams, but the added height between the fake beams would make the room look less cramped.

A coffered ceiling might be sort of labor intensive, but it would sure look nice!

Here is a link that might be useful: kitchen coffered ceiling.

Look at {{!gwi}} not so many coffers, so maybe cheaper. And a center recessed area, slightly off center which might work for you?

here's another {{!gwi}} w/ one big coffer in the center.

You could do two, or something.

These are both sort of modern, but add a little molding, and they'd look more traditional.

Talleysue, a couple of your pix -- coffered ceiling in CENTER and similar coffered ceiling with one big coffer in center -- are close to my neighbors' (but prettier). However, I'd throw off the height of all of my cabinets throughout the rest of the room.
Quote on 2 new cabinets on window wall is $1900.
And I'd have a dropped down area protruding about 36" into room, 6" deep, running the whole length of the window wall. I'd put in some molding but it's still not terrific. Best of a bad lot, I think.

Thank you all for the advice! Talleysue, I now know what my neighbors have and what they should look like! I kept on staring at the drain pipe and ultimately realized that it could be rerouted; got my plumber to okay the concept; am waiting on a bid from him (maybe about $1200 -- lots better than $4800); and am much less stressed. No dropped ceiling, no 12 inch backsplash, no problem.
Until tomorrow's disaster.