Need ideas for redecorating a small kitchen on a very limited budget

My mom has asked me to help her redecorate her small kitchen.
She has very limited cupboard and counter top space; it is an eat-in kitchen with an awkward layout. They don't have a lot of money to spend so this will be a challenge.
The size of the kitchen is approximately 8 feet wide by ten feet long. I forgot to measure this weekend so I may be a bit off on the dimensions, I just know it is very small, especially when the three of us kids and our children are all there at the same time (which is often). I've drawn a rough layout of the kitchen. She needs to get rid of the microwave stand and the the shelving unit to provide more space but she doesn't have anywhere to put the microwave and she uses the bottom portion of the shelving unit for storage as well. Currently the wall behind the table has a formica sheet applied to the wall, which goes 4 ft up from the bottom, the top part of the wall is painted white. We want to remove the formica board, but my mom doesn't want to just paint that wall, she thinks it will get marked up from the chairs too easily. I'm looking for ideas on how to make this space more workable as well as ideas for what we might apply to the wall. I'm thinking maybe slatboards.
I've drawn a rough layout of the kitchen the blue rectangles represent windows and doorways. The large black rectangle is the floor mat my mom has in the doorway from outside. Would love to hear your ideas!