It's difficult to say how much actual work (cost savings) you can perform under the direction of a professional but that might be an option. If you are comfortable assembling pre-cut kits, you should be able to assist a pro. Even small jobs that involve hanging drywall/paneling,doors and 2x framing requires or at least benifit's from a helper. You would need a pro for one day. Two hours to measure and make a material list for you to buy,plus four hours on the day he returns to cut and nail things togeather then two hours to tape and texture. Material for all wood,no texture will be a little more expensive and take longer to trim but you should be able to cut and install trim useing an inexpensive miter box/back saw. At any rate you can paint/stain/finish the project. Find a custom cabinet shop and give them your sketch ups for an estimate.

Form and function so they are bookcases there is the function as for form what do you want . An idea of your style where they are going all kinds of info is needed to answer the question. My first question to my clients is what are you wanting to display and how much space do you need to do so. I actually love the Besta system from Ikea with some display, some storage and a great place to mount the TVat the proper viewing height and IMO a decnet price for an amazing looking unit. The way they are you can get an almost custom look and perfectly designed for what you need.

is this a coat closet or something? (looks like a front door) any plans of you want this to look like? I would think you would want to remove the part of the ceiling that's going in the closet and redo the crown/molding on the outside of it. that's a lot of custom work for a small closet. Nothing else you can do there?

I would go with what the contractor is suggesting. And not worry about the tray ceiling--just let the tray die into the side & front of the new closet. Or remove the tray on just the window wall or from the room entirely. I sure wouldn't let the tray rule over getting a decent closet. This is just a bedroom, not the front parlor.