I would paint the wood ceiling white immediately and wallpaper the back wall in a really cute paper with flowers or bird cages in a turquoise pallet and put a double bed with white wrought iron frame in the middle of the back wall. I would have fluffy cream rugs, vintage leather suitcases in a pile for storage/bedside tables and lamps with glass shades.
Ok, great - love it! Was staring at that pine and sort of wondering how to make it disappear. I'm on the slightly more modern side of shabby chic (not frilly) - my bed is iron but a tester with a linen drape.
I think it will fit in.
Do you think I'd need to do more than paint it white? Any chance the 'stripes' of the ceiling would still be over obvious?