Thanks for your input! I'd probably replace the plastic blinds with something nicer too.. I dont like the look of valence and blinds or I'd do that.. I've seen some roman shades with a second shade that is sheer behind it - I may see if i can modify the shade to add that. I've made my own roman shades and thats what I want in this room, I just really fell in love with a shade that doesnt have that.. and they're super cheap on clearance right now.. Thanks again!

Inserts are fine if your original windows were installed really well and there are no air leaks etc. around the old frames. In my case, I'm dealing with a 100 year old home. 30 odd years ago someone came along and did aluminum insert windows. So they hauled out the double hung sashes and slapped aluminum inserts in the cavity. What they of course missed was the fact that the original wood windows were installed with little to no insulation around the rough framing and the brick walls, and the wood window frame itself just sits nailed into the rough framing with little to no insulation (no spray foam in 1910). Plus, there are massive cavities on either side of each window where the counter weights still reside. Nice big open unsealed uninsulated cavities. On top of that, the lathe and plaster construction on the interior of the solid brick walls is such that there is a 1 inch cavity behind all the plaster (vertical strapping on the walls to which the horizontal lathe is nailed). So, all the nice cold air comes in around the old window frames and permeates the walls. Runs into the floor and ceiling joists and continues its journey putting a chill through the house. Factor in a 3 story house with very tall 5-6 foot windows and you get a ton of heat loss. In this case, a full tear-out is the only thing worth doing. Interior trim is all going, the counterweights will come out, loads of spray foam will go in around the rough framing to seal to the brick walls, and the new windows will be installed properly in the rough framing sealed up with more foam. Fresh trim inside and out. Expensive yes, but the only reason to do this is to make the house more comfortable. The few dollars we might save in heating and cooling costs are irrelevant. So again, if the current windows are installed well and you have no heat loss around them, inserts are fine.

OK, here's what I came up with. Went to Home Cheapo and bought 2 2'x8'x4" white foam boards. Needed 2 to cover the last 20 or so inches. Didn't have any long sheets of paper so I took an old full desk calendar and taped them over the window to create a template (both too the window and too each other). Used a sharpie to trace both the outer edge of the trim as well as the inner edge of the trim. I peeled the template off the window, cut along the outer tracing to reveal the outer shape of the window. I overlayed that to the foamboard and taped it in place. I used a utility knife to make the initial pass, then peeled away the template. Took the board outside and made a full cut thru the board using a drywall saw. BTW...DO THIS OUTSIDE, THE STYROFOAM GOES EVERYWHERE!! I re-layed the template over the board and cut the inner line representing the inside of the window. I wanted that cut to be about 3" of the 4" depth. I then turned the whole thing on its edge and made an end cut with the utility knife to create a rabbetted edge. I knew I couldn't cut a perfect inner shape of the window so I figured an outer edge would allow me to wedge the board into the window. The outer edge would cover the trim, hide any imperfect cuts (thus not letting in any lights thru cracks) and giving me something to gently grab when I want to remove it. It looks good not great. The foam board is a b*tch to cut. It does go EVERYWHERE...think about what those styrofoam packing peanuts do when you open a box. The outer edge is also pretty fragile. But it does block 85% of the light (some does come thru the board itself), and most importantly it cost me $22.

With the hardware mounted on either side, no view to the interior from a neighbor and a bed in need of a headboard, leaving it as is will save $$$ for a good looking pair of bedside tables, properly proportioned lamps and a fabulous headboard, as well as a rug for under the bed. Your ceiling fan looks quite contemporary, so that's a direction you can take with the style of the room.