Don't put CFs in recessed cans. They get too hot and the bulbs burn out quickly. I spent a fortune in bulbs before I ran into an engineer that designs lighting fixtures that clued me in that it wasn't bad or cheap bulbs that were the problem. I was not impressed with the quality of light from the retrofit LED bulbs I saw, but you local lighting store probably has a display you can look at. You might want to look at frosted halogens for the vaulted ceilings. The light is indirect, unlike regular halogens, and very, very warm (2850K). Too warm for my taste, but I prefer cooler lights in general. They provided a lot of light without the glittery halogen look and it was very comparable to a warm incandescent light. I think they would be too hot for a 7' ceiling, though. I'm wrangling with light, too, right now, so I am interested to see what other suggestions people throw out to your question. It seems like there are a whole lot of not-great choices out there right now when you take incandescent out of the picture. I am hoping the light bulb pain the EU is going through now will help get some better options on the table for the US when our turn comes up in 2012.

Have you considered track lighting or a mono rail based light system? Something like this fromTech Lighting? You can hang pendants off the track also. What is your budget? What is behind the wood paneling and can you install fixtures on the ceiling? Do you see the monorail in the image below? Here is a link to TechLighting Photo gallery to get some ideas. WAC and Bruck also make monorail systems. They rely on a central power source and all the other fixtures in the system don't need a circuit box for the electrical connection. It allows you not to damage the wood panelling you have in place.

Pot lights in a vaulted ceiling are useless I tell my clients with vaulted ceilings to check out Tech kabel lighting it allows the lighting to be where you need it the heads are moveable so if you change furniture the lighting still works you can add heads if you need them and they are installed at human height. This system is best thought about at the stage of building you are at to make sure all the electrical is in place and if course now do LEDs These pics are just a couple of ideas , visit a really good lighting store where there are knowledgable people you know about this system. I love Ikea for many things but lighting IMO is where you want to buy the best you can for overall lighting then add lamps that are easy to replace.

Good advice is given already: lights under the upper cabinets. You could also have a crown installed up the upper cabinets and work with indirect lights behind those. Are those cabinet doors still for sale? You could replace some with glass doors out of the same series, so you can have light in those as well. And as lhutch13 wrote: the paint color doesn't match the cabinets. If you really like the gray, maybe you could paint the cabinets? You'd have to change out the back splash then too. Or just find a paint color that does match. Love the architectural elements of your breakfast nook! A round rug would set the table better. Ikea sells a cheap, but nice and easy to install way of cabinets and glass doors lighting.