I think from what you say that you will have an a light grey wall color from the high railing down, darker grey above the rail, and white on the ceiling? You would paint the fireplace surround the light grey color (Cornforth white) but paint the remainder of that wall darker grey (so below the rail as well), with white built-in cupboards on each side...is this correct? If so, it seems there would be a "stripe" of the darker grey around the room on the upper wall, not sure how this would look (a photoshop mock up would help, but I don't have that skill). I like the Cornworth color and think it looks great with white. I would use only the two colors - white for the trim/rail, the fireplace surround, and the ceiling, and light grey for the rest of the walls.

Hi, It depends what you want to achieve. Do you want to make a feature of it.. Go Olive. Or do you want to blend it in and minimise its impact so as not draw attention to it? Regards, Gina

I'd be temped to paint it white and either put a black cast iron insert in or line out the opening with brick (love the herringbone example shown below) and put a wood burner in. http://www.chesneys.co.uk/products/accessories/interior-panels/ches-brickherin

I’m no expert but if you want a nice clean finish it’s best to get a plasterer to skim the walls. You could try some filler like Polyfiller in the dips, let it dry hard then gently sand smooth.