I really like Cliff and Joan's- it looks light and modern to me especially with all the "chevron" going on right now. Remember if it was put there to be an accent wall and if you treat it like an accent it will blend in. In my opinion, focal walls and accent walls are two different animals. An accent compliments the area and doesn't overpower; while a focal point steals the show; I think the decision is your's which way to go. Do you have a overall plan in mind for the space or just know you hate it? If you don't have a plan, I would try to work with it until you know for sure where you are heading. Plus whitewashing is a fairly easy and fast fix. =)

Still not any closer to deciding what to do. Been busy trying to get the building plans approved. It was suppose to be close to approval back in March. We are still waiting. We were told by our architect that we could not keep the existing redwood exterior siding as we are in a Wildlands Urban Interface area. He suggested stucco. We saw there is a WUI approved product list for California and talked to some of the vendors. We currently have 1x8" tongue and groove vertical redwood siding and the vendors told us that is WUI compliant. Who should I believe? We would prefer to keep the wood siding. Because the existing exterior is somewhat neglected, we are wondering how we can get the wood restored and how it will look with new 1x8" redwood siding that we will need to put in for the addition. Will this be the same kind of professionals we need to get a hold of as the ones suggested for the interior paneling? Thanks in advance! Here are a few pics of the exterior siding:

Unless there is a need for grandparents to have the first floor bedroom, my preference would be that room for a playroom. All the noise and toys would be confined to the first floor where family activities are centered. Mom and Dad will be nearby. The kids will be encouraged to run outside directly from inside play. Snacks will be confined to the first floor so no cookies and juice spilled upstairs. I also, as the mother of three, worry that playroom noise would be audible to anyone trying to sleep. I would build a storage wall to the right of the doorway to hold crafts and toys. Later when the teen hangout becomes a reality, that room can convert to guest room with great storage.

The first question is, "Do you want to keep the paneling?" If you do, then as others have pointed out, a decent carpenter can fix that. However, if you do not want to keep the paneling, there are TONS of options. You can dry wall it or if you want something a bit more interesting, you could tile it. With products like Schluter & Wedi, tiling is not the hassle it was before. And there are gorgeous peel and stick tiles that look great. You can get some of the relly nice fake stone panels. Most of these are so good, uyou cannot tell they are not real stone. There are stone veneer panels that actually are rea stone but sliced extremely thin. There are gorgeous PVC-type panels that look like real tile & stone. You could put up bead board, diferent paneling, or a dozen different things. A different thought would be that you could get some nice bookcases and have built-in bookcases. You could even put up acrylic panels you made yourself using some of the acrylic pour techniques (check youtube for directions). You need to think about how you want it to look. Here are a few links that I have found (caveat, I have not woked with all but I've gotten samples from some and the samples I have are gorgeous): https://fauxstonesheets.com/#Tokoyo https://www.sognaretile.com/collections/wall-tile-trim https://www.dumaplast.com/en/brands/waterproof-tongue-and-groove-wall-cladding-dumawall https://www.textureplus.com/store/ https://www.lowes.com/c/Siding-stone-veneer-Building-supplies https://www.flooranddecor.com BTW, we are installing a second kitchen in our house and we were oiginally looking at using a regular countertop due to the cost, but then found some large format tiles (24" x 48") on sale. I hate grout lines on a countertop, but with the large format tiles, the grout lines would very few and far between and it looks so much better than the inexpensive countertops. Open your thoughts to something different, you may find something yuo like a LOT better. HTH!