Thanks again, some more amazing ideas.
The cupboard is now empty, sadly my leg is in plaster so I couldn't stick it all up in the attic, but dh really appreciated me dishing out instructions 
The cupboard looks massive now.
So far I have ordered - a faux fur rug, 3 throws, 10 cushions all different shapes and sizes, a padded storage bench that they can sit on and keep books in, some of the ikea spice shelves, some plastic stackable boxes, I found a drape thing in the cupboard that dd had over her bed a few years back so I'm going to hang that from the ceiling and I bought some fairy lights and some of the wall mounted battery operated lights too, 3 bean bags, (faux) leather, fur and suede and I found a great deal on a book bundle from ebay which completely blew my budget I found my little stereo so I'm going to stick a shelf up in the corner of the cupboard and put it on there.
I have decided to do a mural, but not a woodland one, I thought it would look too busy so I am going to do a Dr Seuss theme, on one side I'll incorporate a character holding up a chalkboard, and the other a magnetic board and then either paint a couple of phrases in the sky area of the mural or do it on canvas and hang them, I'll see how it looks first.
I just hope it doesn't look too cramped, I want it to be a lovely comfy space for them, although dh is still making noises that he thinks it won't work, I have to prove him wrong.
I'm going to have a look in more depth at those links (thank you) to see if I can steal any more ideas from them, there are some really great book nooks out there. I had no idea it was even a thing.
Hopefully it will be done in the next two or three weeks, as soon as it is I'll put some before and after photos up on my profile so you can see it.