I like to follow the rule of thirds. It is aesthetically pleasing. However, in this situation, I'm trying to figure out if the 1/3 point is the rod itself or the distance from the top of the panel to the ceiling. The difference is not that great, but could, I suppose, throw things off. Let me see if I can explain what I'm talking about. The distance between the top of the window casing and the ceiling is 14". One third of that is 4.66". The distance from the floor to the top of the window casing is 80". If I use the 84" panels and allow for about 1/2" clearance at the bottom, the top of the panel would be about 4 1/2" from the ceiling. BUT, if I want the rod to be 4 1/2" from the ceiling, then I need to purchase the 95" panels and shorten them and the top of the panel ends up about 6 1/2" from the ceiling! Does this make any sense? WWYD??? Now, let me show you what I think I'm going to use for the rod. Does it blend in with the wall enough? And which of these two colors do you think I should use? The one draped over the sofa is SAND and the other that I didn't bother to unfold from the way it was packaged (sorry about that) is IVORY. If you'd like to see the IVORY opened up, I can do that. SO MANY DECISIONS! I don't know why my pictures are larger than usual. I swear I resized them the same as all the others. Sorry.

I bought a couple nice substantial decorative rods from Ross for about $20 or $30 a piece and was able to put them together to make about a 180" rod. They each had a smaller pole that slipped into a larger pole and I used the two larger ones with the smaller one connecting the larger two in the middle. I could have made it even longer by using that fourth pole. I could easily adjust the length by sliding them together as much as I wanted. Used the support brackets provided and had an extra set of finials and one of the smaller poles left over that I could use for a rod for a small window now. It was the least expensive way I found to do it and worked out well. But then, I needed a decorative rod because it would show in places, so maybe you could find an even less expensive way by using wooden dowls or pvc or something. But then you'd still need to buy finials and support brackets which could add up.

I wouldn't put cafe curtains or curtains on tension rods because people may tend to lean against the bottom of the window, depending on how the window seat is designed, which could interfere with the curtains. I definitely would not do drapes. There are so many other options -- roman shades, woven wood blinds (that's what I have in my kitchen window seat -- just inside-mounted woven wood blinds), a roller shade, could also add a valance if you wanted. In the little girl's room above, I'd ditch that drape and hang a valance over the window, hung about halfway between top of window and ceiling, maybe even on a tension rod between the two built-ins so it fills the space (not hanging the curtain rod on the window trim).

I'm not sure if I am completely understand your dilemma so forgive me if what I write doesn't make sense, What is the reason for the short, lighter curtain? Is it a sheer for privacy? If you need privacy and your sheers are returnable you might consider replacing them with blinds. Blinds are considered a more modern look than sheers and would work better with your rug and furniture. If your sill is interfering with your longer panels you should be able to find rods that extend out farther than the rods you have now. If you have the room, I would also suggest that you lengthen your rod so when your long curtains are pulled back you see the window trim. You may want to add some extra panels for fullness. The designer trick to to hang your curtains high and wide. This blog has some good suggestions about curtains: http://www.younghouselove.com/2009/06/email-answer-its-curtains-for-you/