My opinion:
Leave the ceiling alone. Don't mess with the color of the wood. First, it can't be made lighter without a lot of stripping and sanding. Second, it is a really nice exposed beam craftsman design.

The wall paneling is a bit too much. I would remove it and put up drywall, and or build an entertainment center w/ cabinets and shelves for the entire wall. Use Birch or Maple w/ a natural finish for the cabinets and a maybe darker color wood like cherry for the face frame.

Replace the painted metal railing by the stairs with something more contemporary. I like the stainless steel cable railings, run horizontally with wood posts and rail cap.

Changing the wall paneling and railing will dramatically alter the look and feel of the space. You can achieve the light natural look of birch by starting with Birch for your remodeling projects.

Good luck and happy woodworking.

Thanks for the suggestions aidan_m,

Do you have an example photo of the SS cable railing you mentioned? I've tried googling cable railings, but I don't quite see which style you think would fit our space.

I definitely agree about the wood paneling, we were going to use it for testing for wood treatments to the beam then paint, but drywalling it would probably be best.

Thanks!

can you explain how to post pics right onto the forum?

http://www.stainlesscablesolutions.com/images/10.htm

Here is a link that might be useful: check this out

Thanks aidan_m,

That looks really nice, going to have to investigate how much it'll cost me to do something like that.

To post pics into the thread you just use html image tags, like from this link: http://www.w3schools.com/htmL/html_images.asp