How do I fix this up?
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Hi Dee, I'm not sure exactly what you're looking to do with the space, but in general, I would say you could paint the wall and then add a wood cap on top. We did it in our old house and it looked fabulous. You can peek at some pictures here: https://www.diychatroom.com/f14/top-moulding-half-wall-70776/
Boy, that is dated from the 70's. Personally I would remove the pony wall and the solid railing. Replace with wood railing and wood spindles. Would open the area up. Make it appear larger. Let more light in.
I agree about removing the pony wall/solid rail. Install attractive handrails in metal or wood, with balusters no more than 4" apart and 34" above stair tread, to comply with code. If you want a more contemporary look, install cables, but they must be sufficiently secured and comply with codes re: width restrictions.
fix what?
Is this solid wall or a hollow frame? If it is solid, there are a variety of different ways to make it more attractive - mirrors, fabric, etc. If it is hollow, I agree with William above - take it out and create your own wood design with spindle and railing.