What are the walls like above the paneling - are they textured? The easiest fix I can think of is to cover the paneling with paintable wallpaper. You can get it to match your upper walls or get some with a different pattern. Lowes carries them in the store and that stuff goes up so fast. No one will be able to tell there's paneling under it. Here is a link that might be useful:

I wanted to provide an update! First off, we found some very trendy-looking laminate flooring for 84 cents per sq ft. We will be using underlayment that costs 25 cents per sq ft. So, for only $1.09 per sq ft, plus the cost of a few new tools, we’re redoing the floor. My husband will install this with some help from his brother, so we’ll save a ton on labor costs. As for the ceiling tile, I came across “smooth” 2x4 ceiling tiles online for only 76 cents per sq ft. Nothing fancy, but worlds nicer looking than the “basic” tiles that are only marginally cheaper. Add these tiles in with our ceiling grid covers, and it’s going to look fantastic! With new paint, new recessed lights and new light/electrical switch covers, and we’re going to have a room that looks great. Last piece of a very large puzzle to get our home truly move-in ready for a quick sale at top dollar! There are a few somewhat nicely done houses that just popped up on the market by us. One is about a half mile away, new construction. This house has contractor grade everything, including kitchen and bath, and is only slightly larger than ours. Looks nice and new, but we’ve got something that is quality where it really counts. I am hopeful we can list at or even higher than what they listed at. Can’t wait for our agent to see the finished product! Our fingers are crossed for a bidding war!

The walls are not what makes the room a brown hole. The walls are beautiful burled wood or a very tight grain wood perhaps, different camera angles are a bit perplexing to the eye......soooo expensive and such a gorgeous finish with stain... The floor, is not a good match for the walls. It is tooo grainy and does not work with the tight grain or classic burled wood. Don't paint beautiful wood, please. Try to find someone who specializes in re-using such a treasure, than put up your sheetrock and texture it and paint till your heart's desire(sheetrock is not going to absorb sound either, just fyi). The Floor is not up to the challenge of complimenting the tight grain or burled wood walls. The walls are a treasure. The floor is a too-busy wood grain pattern in the area and makes the eye dart around the area, so you will have to pick out some calming area rug to compliment them?

Hi again Keri, My neck hurts just looking at the picture of your tv. What you might consider if there is enough room is getting a cabinet where the tv can be mounting inside and a remote brings it up into the open for view. I saw the construction of such a cabinet on youtube at one point but don't have the link. I have one that I bought used sitting in my garage but it has more cabinets with it and is fairly large. It's the same idea though.