I would also look into different ceiling installation options because 118" will need at least a couple of middle supports if you installed on the sides.... 96" is a very manageable ht to diy! I have regular sized sliders (that are recessed about the same amount as yours except with a lot of molding around them) that I hung a tension like curtain rod on except it is mounted on both sides... I hung open weave linen sheers on them and almost always keep them pulled to cover just one half... anyway, I couldn't have used the center supports with this rod even if I wanted to because I have the rod hung tight near the top like you need to do-- in my case it works because I only have sheers hanging, so less wt and i don't close them too often, so very little tugging on the rod...

Would a rod stick out enough to go over the molding and sill, or would curtains look kind of bent where they hang over the molding? Personally, I love plain white linen curtains like your last picture. Another option, light filtering shades, http://www.ikea.com/us/en/catalog/products/70314592/ However, they don't offer complete privacy at night.

Have you thought about bottom up top down pleated blinds or honeycomb shades? Minimal in design and able to install as inside mount to a shallow depth of only 1/2 inch. Here are some client pictures and how they solved their bay window challenge.

Love the flag on the shelf. What are you thinking? The newer electric blinds and batteries aren't bad. They charge enough during the day to keep the battery topped off. Most times, if they crap out, its the motor or some other electrical component than the batter.