paint works just fine. An eggshell finish is easier to keep clean than a flat finish.

wall away from the other bedroom. Use open bookcases to separate the sleeping area from the living/dining area. On the bedroom side of the bookcases attach curtain rods. The curtains on these rods can be closed at night for privacy but left open during the day so that light from the two windows can reach the remainder of the living area. Elevate the bed on risers so that you have storage underneath. Use baskets on the bottom shelf of the bookcases for additional storage. In the bedroom, place two loft style beds meeting in the corner. The space underneath the beds can be used for storage, desks, etc.

in the living area, use a small sofa and floor pillows for seating. A gateleg table can be placed against the wall or used to separate the kitchen from the living area. Raise the sides for meals and add wooden folding chairs.