If you are using the chalk type paints for ease, then I found the grey tones (winter grey is a lovely pastel ice grey if you prefer a lighter neutral colour or the anthracite is a lovely deep grey that is a great neutral as well) work better on the pine - or most colours except white! The white shows the knot stains through too easily.

If you are painting it in a wood paint then do make sure you sand and seal the pine with a specific knot sealer (2 coats at least) as there is nothing more frustrating than it coming through yellow through pale paint. (speaking from experience, ha ha).

Colour scheme wise... you have a lot of options really but it all depends on your own tastes ie do you like blues or pastels or pinks or greys etc? Deeper colours?

I would say painting your shelves and fire surround would make a huge difference to the room. I've popped in some examples. Maybe a soft grey or white?

This article may help with what colours to go for:http://bit.ly/Origin-guide-to-colour-in-the-home

I think sage green would go well on the alcove walls. There's some really nice lighter colours if you don't want to go too bold, but as stated above, its up to your personal taste.

In regards to the fire surround, you could always paint the lower section and just leave the very top as it is.

I know its not a lounge but this image is my inspiration for my thinking

https://www.pinterest.co.uk/pin/479000110357909202/

Lovely bay window!

I also like your chest/coffee table. Wouldn't rush into deleting or painting it. Yes there is a slight pine overkill atm but some natural wood colour will probably be nice for a bit of 'warmth'.

Re the bay, I feel it would look even better without the pelmet and the curtain ties. But that's just my personal opinion. :)

In my humble opinion the room could do with a little more pattern and I would perhaps get a wallpaper or a new rug or change the curtains. I also agree that the pelmet dates your curtains a little.
Once you have something new to work with you can then decide on a colour scheme taking inspiration from what ever you have bought.
If it were me I would likely plan grey/greens to compliment the fireplace tiles. If you were looking at the Farrow and Ball paint chart I would choose old White, Strong White and pigeon. I would paint the walls old white then the woodwork and the ceiling in Strong White. Then I would paint the bookcase and coffee table Strong White and use Pigeon for the back of the bookcase behind the books. I would leave painting the fire surround until last because it is the nicest piece of wood and you might decide to keep it.
I am sure a professional decoration will wade into this discussion and tell you that you can paint anything with a good enough primer first so you shouldn’t be afraid to paint your bookcase. As far as the top coat it depends on the finish you want- I prefer eggshell. Once you get the painting bug you might decide to paint additional things- someone I know took a very sad nest of tables and updated them with a lick of paint.
Should you change your room from its current yellow tones to a sophisticated grey/ green you might want to finish the room off with new mounts for your pictures and some new lamp shades and cushions.