I think an L-shaped banquette at the half wall (sans spindles) is a great idea. I would keep a small peninsula just to have some division b/w kitchen and eating area, but maybe push it toward the window, depending on how much space you have(not clear on that). I think even a small peninsula would function like an island or center workspace. If you move the DW to the other side of the sink that will make a lot more sense--get it out of the cooking zone. Don't worry about whether or not the sink is centered under the window. Use the space as efficiently as you can...you won't notice tht it's not centered (IMO). If you got a shallower fridge, that would make a huge difference. Also, if you had a range instead of the wall oven, you wouldn't have the oven opening into the main pathway, and that whole wall could be storage--if you think you need that. You might even get enough storage to eliminate some upper cabinets, if that sounds attractive. I don't know how much work it is to demo soffits, but if you are replacing the cabs anyway, I wouldn't dismiss the idea out of hand. You would gain a lot of storage that way and open up the space. HTH! Good luck!

What I would suggest is to do all the wall painting first and then make a decision, you may feel the wood looks just fine with the new paint. I see no problem with painting the foyer and leaving some of the wood showing.

You may want to investigate how to change the stain color. It might be hard to go from dark to light. Here's a chat (random advice) https://www.bobvila.com/posts/9355-stained-wood-siding-can-we-change-the-color When you say you need to paint, which surfaces do you mean, the stained wood, the door, the garage door? Can you repaint the window trim or is that white vinyl? I love groveraxle's pics (!) but some of them show different windows--not sure if you're in the market for that.

I suggest you continue with the same flooring throughout, looks like the flooring mentioned is what you have on the right in your dining room. I'm unable to recommend a wall colour judging from your photos but would suggest painting the crown moulding white and not to outline the corners of the wall on the right of the fireplace. The mantel could be black or white, I'm showing it in black because I find it coordinates nicely with the piano you have on the left. Since you have a small budget I didn't suggest removing/replacing anything from the brick fireplace.