A roller blind is probably the best option in this case as the side walls are sometimes not long enough to accommodate a dormer rods which are really only OK for cottage windows. You could try a slimline pelmet from The Pelmet Company. Pole Design can supply these and will give you assistance on sizes. You could also use a roman blind with small pockets spacings if you don't want to much light block when pulled up. See below which looks rather smart. Pelmet from Pole Design

This is very similar to my bedroom, i have my bed opposite the door and my wardrobe and chest of drawers right next to each other opposite my bed I have a white laminate floor and all the walls are painted white (except for the plum colour wallpaper you can sort of see in the 1st pic which is on a chimney breast right next to my door!!) To keep the room feeling spacious I just went for venetian blinds at the window in a beige colour It works well and doesn't feel cramped at all

The problem - if we end up with this stupid large nib by the alcove is that it kind of dictates the edge of the living room unless we do something clever with it ie build off a bookcase or drinks unit to the left of it to visually extend the lounge) and then run the roof from that. I’ve taken some pics as it is now because you can see visually how much it slopes on the blockwork as it’s not yet boarded. So we could run it flat to just before the rooflight and then slope it down which will visually make the lounge area look wider than it is - or we do it from the nib.

i like Jethro's idea - and I wouldn't have velux windows in bedroom unless you think it's going to be a really dark room just with the regular windows. definitely add velux in bathroom though. we are extending and keeping the pitched ceilings in bedroom and ensuite, gives a not-huge room a bit more wow factor and less of a box. yes more difficult to position lights and probably to heat too, but worth it i think. ceiling height plays a huge part in how you feel in a room so should always try and maximise wherever possible (within reason, keeping to human scale)