I'd cover one of the walls with blackboard paint so the kids could draw on the walls, no problem.
I like the rustic simplicity of this daybed, plus the fun cluster of poofs and lanterns on the ceiling.
For storage, add in a shelf with a colorful collection of large baskets where they can put their toys (dream world, remember?). A shelf filled with fabric-covered Clementine boxes is a nice cheap alternative, especially since kids tend to destroy things so a DIY option might be smart...
...and a fun place to hang clothes, like this mismatched tree
Even lighting can be fun in a kid's room. Take this funky pendant light, for example....
....and these lanterns made from food cans.
A fun mirror brings lightness into the room too. Although a full-lenth mirror would be better, for all the times you play dressup and want to see the beauty of Mom's favorite lipstick all over your face.
A nice last touch is this children's rhyme on the wall.