Conversation area puts the emphasis on draperies
Accessories, paint inexpensive ways to add interest
Since you are essentially starting from scratch, choosing colours should be a simple matter of deciding what you like.
With its western solar exposure, the room could easily handle a variety of rich, warm tones like yellows and oranges.
The wall colour and the accessories you choose are the two least expensive ways to bring in visual interest.
Choose easy-to-co-ordinate colours for those "big ticket items" (the carpet, upholstery and draperies) and add bold pattern and texture through accessories.