Upgrading the pad will help a lot. But before you do that, make sure the shape is what you want. Do you plan to entertain here- space for grill, dining table and chairs- or mostly as a personal retreat? Deciding this will help determine the plan. Also consider the time of day you most often use the area, look at the sun angle- do you need more shade? Do you like to garden? Do you have time to maintain flower beds? Or would a shrub border be more reasonable. I think the block walls could be dressed up with a stone veneer. I wouldn't rip out the walls without getting some expert advice as to the consequences. People don't build walls like that for fun.

So much depends on how you use your space. We use our bar area every day -- we usually eat breakfast and lunch there, but dinner at the table. We also like to have people over several times a year, both large and small groups, and that area gets used for every gathering. So for us, the bar area with a lower level for prep works out great. The height of ours is non-standard: we are tall and I hated my standard height counters. So all our counters--bathrooms and kitchen--are 39". We couldn't raise the bar area too much higher than that because it would have felt weird to sit at, so we lost the room to have outlets at the back of the prep counter. (They are on the sides now.) If our prep counter was lower, I would have liked outlets at the back of it instead. Prep counter is 24" deep; bar counter is 15" deep. Island is 81" long. Because of the way our kitchen is arranged, the drawers open in 3 directions: warming drawer plus 2 drawers for pots and pans open toward the wall with the fridge and stove. Multiple drawers with flatware, napkins, and random kitchen stuff like tape open toward the area where the table is. The end by the sink has a pull out for garbage/recycle and a shallow drawer for foil, sandwich bags, etc. The side view shows the amount of the step-up, which as explained is not much on ours: View of the bar side, seen from the FR (the benefit IMO is that from the FR you don't see any kitchen mess; just the pretty wood panels):

Fully adjustable pendants are sold by rejuvenationhardwre.com e.g. see Brightwood Item # AA 0110 In addition these lights are sold with diverse shades or with no shade. So if you don't like the shades they have you can find separate shades. The fixtures have the classic (old fashioned) shade holder in typical sizes. Schoolhouseelectric.com also sells period shades with sized fitters. It is not entirely clear to me how adjustable the length is. They ask to the nearest inch. I found them to be very helpful by phone when I had questions about other things.

My friend has a bilevel, but it steps DOWN for seating to table height. Her contractor though it was crazy, but ended up loving it. She wanted it lower to use regular chairs, and so it is easier to use for her toddler and handicapped uncle. It's the back side of her peninsula.