I think you need to address the privacy issue first. Post pictures of the other 2 walls.

Draw a floorplan with measurements. We need to know where the windows and door ways are located.

What size bed, TV, dresser etc. What about a closet?

The wall color does not go with the tile. Gray is depressing so I would start with a rug large enough to only leave about 12" all around of the floor showing.

There doesn't seem to be a wall across from the Plantation Shutters/doors.

Yes right now there is no wall on the other side , but I am going to add drywall with a door to create privacy. For the closet , I will add a small ikea one or I will do the target bookshelf closet hack . The room is big enough for a queen bed. Thanks

A gallon of primer and a gallon of a beautiful paint color would make a more cheerful, warm, and welcoming room for your MIL. We had prison grey walls in our entry and it was the first thing I changed. We had dark chocolate walls in a guest room and I spent three days repainting so our guests would be comfortable. For less than two hundred dollars and a weekend of work, this room will be changed.

I never like dilemms that start by saying what you are not going to do. But IMO start with some nice bedding. Does she have room for a chair and a TV in this space . IMO both nice for guests but a must for someone staying forever. IMO ask her what colors dhe likes this is going to be her space . The tiles are not attractive but a large rug can hide most of them. I like gray bedrooms but I think the bedding can be used to choose a color she likes. Paint is cheap and the rewards are huge . I would remove the shutters since they block so much light always and are hard to evee see out of . Drapes that can be closed and opened are nice looking in a bedroom and also practical .

The most important change is new paint. A light, cheerful color from her bedding would be good. A twin bed will give her room for a reading or tv-watching chair. The plantation shutters are fine, no need for curtains.

We need a floor plan with measurements - impossible to tell how to arrange furniture without the measurements of the room. Also, do you plan to address any of the privacy issues?

If you're adding drywall in the room you'll need to paint so I strongly suggest you repaint the entire room in a less drab colour as a permanent bedroom for your MIL.

Don't know the style you're looking for and cannot really suggest furniture placement since we don't have a floor plan showing all dimensions including doors and windows placement but here's one idea of what can be done.

First, have you asked your mother-in-law what colors she likes? What she plans to bring with her?

As @lisedv said, you're going to have to paint that drywall anyway. That gray is so dark and gloomy. Why not a much paler gray? Or a warm ivory, shades lighter than the lightest tone in the tile floor? I understand not wanting to change out the tiles, but please consider painting the room a lighter color. that harmonizes with tile.

On either side of the new door put your Ikea closets.

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Bring in warm wood tones that harmonize with tile floor. Make sure you get a a good rug pad so it sits flat and isn't a tripping hazard for an older person.

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This looks like Benjamin Moore seasalt, which is very beautiful in bedrooms and with gold tone flooring and furniture. It's very serene.

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Again, many gold wood finishes to bring warmth to very pale gray walls.

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Pale sage with golden toned flooring.

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Not this style, but this idea of a tabletop desk across a window is a practical way to create desk space for your Mom-in-law with some low chests below perhaps for storage.

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You're very generous to invite your mother-in-law in. Hope you can work together to create an inviting, comfortable sleeping and sitting room for her.

@rho: As you point out, there's no fourth wall shown in OP's photos, let alone measurements. (OP did say they're putting a wall there, but we still have to see that side of the room.) Showing a space from all four sides, including all doorways and windows, is the most basic information someone should include in a Design Dilemma. Good design takes in an entire space, not just what the OP sees from one end of a room. People who post tend to be concerned about colors and furniture choices, which come after the best layout is settled.

The gray is depressing & cold. a warm neitral with the time would help. we need to always consider color & mood. the mother n law likely wont recognize impact of color but i see it daily in nursing homes.

You have a beautifully neutral color palette to begin. With this cream bedding, you can add pattern in her favorite colors with a throw and pillows. Maybe she has an art piece she loves that could be the inspiration.

If she only needs a twin bed, a small table and chairs would be very nice to include.

After reading all the comments : I will change the wall colors , but the tiles will stay because it is all around the house, I will put a large rug that will cover most of the titles . The plantation shutters will stay as they provide privacy for the room. Thank you so much for the input - I have a clearer vision on how to go about it now .

Keep the chandelier

I would replace the chandelier with something a bit more glam.🙂

Wow! Thanks , this is really nice - yes I will replace the chandelier with a smaller one - glam !

Shutters are beautiful, you've decided to paint, you have a vision for storage. I'd think next about how to reduce fall risks as I assume she will age in place in this space. Just went through these considerations with my parents who are really healthy now, and we want to keep it that way.

Their OT friend evaluated the space and two keys were: keep enough space to navigate around the bed and between furniture. In your case, could a full instead of queen be useful for more walking space? (Maybe queen is fine, can't tell without measurements. Tape it out on the floor and walk around.)

Area rugs are huge tripping hazards. I can see why you want one here though. I wonder if having one as large as possible to function nearly as wall to all carpeting would be better?

Glad you can find space in your home for her. You sound like a nice DIL.

What do you think of this mood board for the room

Here is how the room turned out- I still need to change the chandelier . I ordered the nightstands and they came so small and I need to change them as well. What do you guys think?